How To Save Tax For Salary Above 50 Lakhs?
For a salary range of Rs 50 lakh, the most important step in the tax strategy is determining the most beneficial regime. The new regime remains the most beneficial for taxpayer with limited deductions, whereas the old regime favours those who have a lot of tax saving deductions.
The old tax regime remains the most beneficial when you have a tax deduction of more than Rs. 8 lakhs.
Key Deductions under the New Tax Regime
- Standard Deduction: Rs. 75,000 of standard deduction is available under the new regime for all salary levels.
- Section 80CCD(2): Up to 14% of the basic salary can be claimed as a deduction on employer's contribution to NPS.
- Section 24: Entire interest due for the financial year can be claimed as a deduction on home loan interest paid on a let out property.
- Retirement Benefits: Settlements like gratuity are leave encashment are also exempt under the new regime, subject to ceiling limits.
Key Deductions under the Old Tax Regime
Under the old tax regime there are many components in your salary that are exempted from taxes and deductions Let’s break down some key components of salary that are exempt from taxes:
- Salary (-) Exemptions = Taxable Salary Income
- Taxable Salary Income (-) Deductions = Net taxable income
Take a look at them below:
| Salary Components | Taxability |
| Basic Pay | Fully-taxable |
| Dearness Allowance (DA) | Fully-taxable |
| House Rent Allowance (HRA) | Exemption up to a certain limit. |
| Leave Travel Allowance (LTA) | Actual travel ticket expenses exempt for two trips in 4 years under 10(5). |
| Mobile/ Internet reimbursement | Exempt if: |
| – used predominantly for office purposes | |
| – proofs/bills submitted | |
| Children’s Education and Hostel allowance | Rs 4800 per child (max 2 children) |
| Food Expenses | Rs 50 per meal (max 2 meals a day)Annual= Rs 26,400 (50*2*22 days*12 months) |
Moreover, when you are tax planning for a salary above 20 lakhs, you can get deductions on the following:
| Particulars | Limit |
| Standard deduction | Rs. 50,000 under the old regime. |
| Paying health insurance policy premium (Section 80D) | Self, your spouse, and your dependent children: |
| Rs 25,000 (Rs 50,000 if aged 60 and above) | |
| Parents: Rs 25,000 (Rs 50,000 if aged 60 and above) | |
| Opting for an education loan (Section 80E) | Interest deduction for 8 years from the year of repayment of loan taken for the higher education of yourself, your spouse, dependent children, or a student of whom you are the legal guardian. |
| Donating to charity (Section 80G) | 50% or 100% of the eligible amount. |
| Investing in tax saving instruments (Section 80C) | Tax benefit of Rs.1,50,000 per year. You can invest in the |
| following options: | |
| – Employees’ Provident Fund (EPF) | |
| – Public Provident Fund (PPF) | |
| – Equity Linked Saving Scheme funds (ELSS) | |
| – Home loan repayment and Stamp duty | |
| – Sukanya Smriddhi Yojana (SSY) | |
| – National Savings Certificate (NSC) | |
| – Fixed Deposit for 5 years, and more | |
| Costs to treat disabled dependents (Section 80DD) | If you have disabled dependents for whom you bear |
| medical expenses, you are eligible for the tax relief: | |
| – 40% disability: Rs.75,000 | |
| – Severe or 80% disability: Rs.1,25,000 | |
| Deductions on home loan payments | Principal amount: Upto Rs 1.5 lakhs u/s 80C |
| Interest amount: Upto Rs 2 lakhs paid u/s 24b | |
| The maturity amount of a Life Insurance Policy | Maturity proceeds are tax-exempt if the sum assured is ≤: |
| – 20%: policies issued before 1 April 2012 | |
| – 10%: policies issued after 1 April 2012 | |
| – 15%: policies issued after 1 April 2013 for a person with disability or disease. |
Employer’s Contribution to NPS u/s 80CCD(2)
- Section 80CCD(2) allows deduction for contribution made by employer in National Pension Scheme (NPS).
- Deduction is available under both new regime for this amount, though the limit for deduction differs according to choice of regime.
The following table describes the quantum of deduction available under both the regimes for contributions made by the employer in the NPS scheme under section 80CCD (2)
| Particulars | Central / State Government Employer | Other Employer |
| Old Regime | 14% of salary (basic + DA) | 10% of salary (basic + DA) |
| New Regime | 14% of salary (basic + DA) | 14% of salary (basic + DA) |
Apart from the above deduction, all the deductions available under the new regime is also available under the old regime.
Old v/s New Tax Regime Calculator
Use the below calculator to understand the tax implications under both old and new regime for your salary level.
Calculate Income Tax on a Salary Above 50 Lakhs? Tax Calculation 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.
For FY 2025-26 the tax liability of Mr. A will be calculated as follows under the old and new tax regime:
| Particulars | Under the Old Tax Regime (FY 2025-26) | Under the New Tax Regime (FY 2025-26) |
| Gross Salary | 50,00,000 | 50,00,000 |
| Less: Exemption u/s 10 | ||
| HRA | (3,50,000) | NA |
| LTA | (60,000) | NA |
| Children's Education and Hostel allowance | (9,600) | NA |
| Standard Deduction | (50,000) | (75,000) |
| Professional Tax | (2400) | NA |
| Taxable Salary Income | 45,28,000 | 49,25,000 |
| Less: Deductions | ||
| 80C (Refer Note below) | (1,50,000) | NA |
| 80D | (50,000) | NA |
| 80E | (25,000) | NA |
| Net Taxable Income | 43,03,000 | 49,25,000 |
| Tax on the above income | 11,03,400 | 11,67,500 |
| Rebate u/s 87A | NA | NA |
| Total Tax (Including 4% cess) | 11,47,536 | 10,99,800 |
By opting for the new tax regime, the taxpayer will be able to save Rs. 47,736 in taxes in FY 2025-26. If he had deductions of more than Rs. 8 lakhs, the tax savings due to the deductions under the old regime would have surpassed the tax savings due to the beneficial slab rates under the new regime. Thus, the old regime would have been more beneficial
Moreover, eligible individuals can also claim these deductions:
| Interest on home loan deduction u/s 24b | (2,00,000) |
| Home loan 80EEA (Applicable only for loan sanctioned between 1st April 2019 to 31st Mar 2022) | (1,50,000) |
| Investments in National Pension Scheme (NPS) u/s 80CCD(1B) | ( 50,000) |
| Interest on Electric Vehicle Loan u/s 80EEB (Applicable only on loan taken between 1st April 2019 to 31st Mar 2023) | (1,50,000) |
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About the Author
CA Mohammed S Chokhawala
I'm a chartered accountant, well-versed in the ins and outs of income tax, GST, and keeping the books balanced. Numbers are my thing, I can sift through financial statements and tax codes with the best of them. But there's another side to me – a side that thrives on words, not figures. Read more
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