How To Save Tax For Salary Above 50 Lakhs?

There are multiple tax-saving techniques that taxpayers can make use of in order to reduce their tax burdens. These methods come in handy for those individuals who have a high yearly income. 

If you belong to the above 50 lakh tax slab, you can opt to reduce the tax liability using any of the tax-saving options below. The guide below states how much tax will be deducted for 50 lakhs and various tax-saving methods you can use to reduce your yearly taxable income. 

Budget 2025 Update

The income earned up-to Rs.12 Lakhs under new regime will ultimately have Nil tax liability. Here's how!

The modified slab rates for new tax regime applicable for FY 2025-2026 are as follows:

• The rebate allowed under section 87A has now been increased to Rs.60,000 for new regime from Rs.25,000. Since the rebate allowed has been increased, tax incidence for income up-to Rs.12,00,000 will be zero. 
• Rebate is not allowed for income taxable at special rates. For example, capital gain u/s 112A.
• Marginal relief on rebate is still applicable. 
• The new Income Tax Bill has been tabled by the Honorable Finance Minister in the Lok Sabha. Learn more.
• It is to be noted that the old regime and new regime for FY 2024-25, both falls under the existing Income Tax Act. The bill, when passed, will become the new Income Tax Act, which is applicable from 01st April 2026.

Tax Slabs Under Old vs New Tax Regime

As per the new income tax guidelines, you can opt for either the new or the old regime while filing your taxes. Here is a difference between the two:

Note: 

• The overall surcharge rate is capped at 25% instead of 37% for individuals.
• The standard deduction for salary income of the old regime is Rs.50,000. For the new regime, it is Rs.75,000.

If you file your taxes according to the new regime, you cannot avail most of the tax benefits. To calculate your tax liability using both regimes, you may use the old vs new tax regime calculator. 

Tax Saving Options Under New Tax Regime

Individuals opting for the new tax regime have limited scope for claiming exemption or deduction. The main purpose of introducing a new regime is to reduce the deductions and exemptions available in the Income-tax Act. In exchange for such exemption and deduction, taxpayers are given a lower tax slab, giving them an incentive to switch to the new regime.

However, even in the new regime, taxpayers can still claim certain exemptions or deductions as follows

Salary:

• Transport allowances in case of a specially-abled person.
• Conveyance allowance received to meet the conveyance expenditure incurred as part of the employment.
• Any compensation received to meet the cost of travel on tour or transfer.
• Daily allowance received to meet the ordinary regular charges or expenditure you incur on account of absence from his regular place of duty.
• Perquisites for official purposes
• Exemption on voluntary retirement 10(10C), gratuity u/s 10(10) and Leave encashment u/s 10(10AA)
• Budget 2023 introduced a standard deduction of Rs 50,000 under New Tax Regime applicable from FY 2023-24. This has been increased to Rs.75,000 in Budget 2024 applicable from FY 2024-25 

House property:

• Interest on Home Loan on let-out property (Section 24)

Other sources:

• Gifts up to Rs 50,000
• Budget 2023 also introduced deduction under Section 57(iia) of family pension income. In Budget 2024 Limit of maximum Deduction under Family Pension has been increased from Rs. 15,000 to Rs. 25,000. 

Chapter VI A deductions:

• Deduction for employer’s contribution to NPS account [Section 80CCD(2)]
• Deduction for additional employee cost (Section 80JJA)
• Budget 2023 further introduced deduction of amount paid or deposited in the Agniveer Corpus Fund under Section 80CCH(2)
• The deduction on employers contribution to pension Scheme as per Section 80CCD (2) has been increased from 10% of salary to the 14% of salary in Budget 2024.

Here's a detailed list of exemptions and deductions available under the Old vs New Regime.

Tax Saving Options Under Old Tax Regime

You can conduct your tax planning by making use of certain exemptions and deductions that are allowed by the Income Tax Act. But you first need to understand your salary structure.  

Your salary component may include various tax-exempt allowances. The remaining salary will be your taxable income. 

• Salary (-) Exemptions = Taxable Salary Income
• Taxable Salary Income (-) Deductions = Net taxable income. 

Therefore, we can maximize tax savings through exemptions and deductions.

Part 1- Exemptions

You can find out your salary structure from the CTC, which generally looks like:

Part 2- Deductions

When you are tax planning for salary above 10 lakhs, you can get deductions on the following:

These are some of the ways in which you can reduce your tax burden under the old tax regime. However, there are several terms and conditions that are associated with each tax-saving method. The tax deductions can be claimed while filing for Income Tax Returns. 

Calculate Income Tax on a Salary Above 50 Lakhs? Tax Calculation Example

In the above discussion, we understood the tax deductions and exemptions available under the old and new tax regimes. Considering all the tax-saving investments, let us calculate the income tax under each regime and compare the tax liability using the example below. 

Example: Mr A has a Salary income of Rs. 50 lakhs. He can claim an HRA exemption of Rs. 3.5 lakhs, LTA exemption of Rs. 60,000, Children's education and hostel allowance of Rs. 9,600. Profession Tax of Rs. 2,400. He has also invested Rs. 1.5 lakhs in PPF, paid a medical insurance premium of Rs. 50,000 towards senior citizen parents. He paid Rs. 25,000 towards his child’s interest on an education loan.

Moreover, eligible individuals can also claim these deductions:

Note: You might not always have a home loan or be interested in the investment plans listed under Section 80C. However, you may consider these investments to make use of the entire Rs 1.5 lakh limit under 80C:  

• ELSS mutual funds- Rs 60,000 (Investment: Rs 500 per month SIP, Returns- 12% CAGR, Lock-in-period: 3 years)
• ULIP or endowment plant- Rs 12,000 premium
• Children’s Education fees: (Rs 25,000 to Rs 1 lakh) 
• EPF: Around Rs 30,000 – Rs 72.000, i.e., 12% of your basic + DA (contribution already made by your employer)
• Term plan insurance- Rs 12,000 premium (Around Rs 1 Crore cover)

In the above example, the tax liability paid under the old tax regime is lesser than the new tax regime. Hence in the given example, the taxpayer has to choose the old tax regime to avail minimum tax liability. 

In conclusion, if you are a taxpayer with income more than 50 lakhs investing in tax-saving options will be beneficial while paying tax to the government. However, a comparative analysis is required based on a specific Individual. This can be done using our Income Tax calculator.

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