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How To Save Tax For Salary Above 50 Lakhs?

By Ektha Surana

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Updated on: Apr 5th, 2024

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32 min read

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. 

Latest Update as per Finance Act 2023.

The Finance Act 2023 has changed the tax slabs under the new tax regime. Also, the overall surcharge rate is capped at 25% instead of 37%. The standard deduction for salary income is now available under both the old and new tax regimes.

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:

Tax Slab

FY 2023-24 Tax Rate (Old tax regime)

Tax Slab

FY 2023-24 Tax Rate (New tax regime)

Up to Rs 2,50,000

Nil

Up to Rs 3,00,000

Nil

Rs 2,50,000 – Rs 5,00,000

5%

Rs 3,00,000 – Rs 6,00,000

5%

Rs 5,00,000 – Rs 10,00,000

20%

Rs 6,00,000 – Rs 9,00,000

10%

Rs 10,00,000 and beyond

30%

Rs 9,00,000 – Rs 12,00,000

15%

NA

NA

Rs 12,00,000 – Rs 15,00,000

20%

NA

NA

Rs 15,00,000 and beyond

30%

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

  • 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 expenditures 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).
  • Interest on Home Loan on the let-out property (Section 24) 
  • Gifts up to Rs 50,000.
  • Deduction for employer’s contribution to NPS account [Section 80CCD(2)]
  • Deduction for additional employee cost (Section 80JJAA).
  • Standard deduction of Rs 50,000 under the New Tax Regime applicable from FY 2023-24.
  • Deduction under Section 57(iia) of family pension income.
  • Amount paid or deposited in the Agniveer Corpus Fund under Section 80CCH(2).

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 maximise tax savings through exemptions and deductions.

Part 1- Exemptions

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

Salary Component

Taxability

Basic 

Fully-taxable

Dearness Allowance 

Fully-taxable

House Rent Allowance (HRA)

Exempt up to a certain limit. Calculate now

Leave Travel Allowance (LTA)

Actual travel ticket expenses are exempt for two trips in 4 years under 10(5). Read more

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

Rs 50 per meal (max 2 meals a day)Annual= Rs. 26,400 (50*2*22 days*12 months)

Professional Tax

Generally Rs 2,400 (Varies from state to state)

Part 2- Deductions

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

Paying health insurancepolicy 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  

Maturity amount of a Life Insurance Policy

Maturity proceeds are 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.

Standard Deduction

Rs 50,000 (Will be given to all without any restrictions)

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

Example to Calculate Income Tax on a Salary Above 50 Lakhs

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.

Particulars 

Under the Old tax regime 

Under the new tax regime

Gross Salary

50,00,000

50,00,000

Less: Exemption u/s 10

 

 

HRA

(3,50,000)

LTA

(60,000)

Children's Education and Hostel allowance

(9,600)

Standard Deduction

(50,000)

(50,000)

Professional Tax

(2400)

Taxable Salary Income

45,28,000

49,50,000

Less: Deductions

 

 

80C (Refer Note below)

(1,50,000)

80D

(50,000)

80E

(25,000)

Net Taxable Income

43,03,000

49,50,000

Tax on the above income

11,03,400

11,85,000

Rebate u/s 87A

NA

NA

Total Tax (Including 4% cess)

11,47,536

12,32,400

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)

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.

Related Articles:

How To Save Tax For Salary Above 7 Lakhs?

How To Save Tax For Salary Above 12 Lakhs?

How To Save Tax For Salary Above 10 Lakhs?

How To Save Tax For Salary Above 15 lakhs?

How To Save Tax For Salary Above 20 Lakhs?

How To Save Tax For Salary Above 30 Lakhs?

How to Save Tax For Salary Above 1 crore?

Frequently Asked Questions

What is the surcharge for the income exceeding Rs. 50 lakhs?

The surcharge is charged as an additional tax for those whose income is more than Rs 50 lakhs, and the income exceeding 50 lakhs surcharge is 10% of the income received. 

Which is the tax regime best suitable for Rs. 50 lakh salary?

If you are a taxpayer who has investments made, then it is better to opt for the optional or old regime. However, if you have a comparatively lower amount of investments made choosing the new regime would be helpful.

How can I save tax on a salary greater than 50 lakhs?

Individuals having a salary exceeding Rs. 50 lakhs can save the taxes by better structuring the salary component like Employer contribution to PF. 

About the Author

Multitasking between pouring myself coffees and poring over the ever-changing tax laws. Here, I've authored 100+ blogs on income tax and simplified complex income tax topics like the intimidating crypto tax rules, old vs new tax regime debate, changes in debt funds taxation, budget analysis and more. Some combinations I like- tax and content, finance & startups, technology & psychology, fitness & neuroscience. Read more

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Quick Summary

Tax-saving techniques can help high-income earners reduce tax burdens. Finance Act 2023 changed tax slabs and surcharges. Differences between old and new tax regimes. Limited scope for exemptions and deductions in the new regime. Various exemptions and deduction options in both regimes explained.

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