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How to Save Tax for Salary Above 7 Lakhs?

By Sujaini Biswas


Updated on: Apr 4th, 2024


19 min read

The 2023-24 Budget proposed some major tax reforms by introducing tax rebates on an income up to ₹7 lakhs under the new tax regime. This means that taxpayers who have an income below ₹7 lakhs will not have to pay any tax at all if they choose the new tax regime. Previously, there were limited exemptions or deductions; however, the FY 2023-24 Budget has announced various exemptions and deductions under the new tax regime. 

Before filing your income tax return this year, let us understand how you can save tax on your salary with an example. 

Latest Update as per Finance Act 2023

As per the latest Finance Act 2023, changes have been made in the slab rate for the new tax regime. The rebate provided under section 87A has also been increased to Rs 25,000. Thereby, for Salary income upto Rs 7.5 lakhs, tax liability will be zero. 

How to Save Tax if You Have an Annual Salary of Above Rs 7 Lakh?

Let’s say your gross salary is Rs.7,50,000. In the present scenario, your default tax payment system will be the new tax regime applicable from 1st April 2023. If you have income from Salary, then up to Rs 7,50,000 taxable income tax liability will be zero if you opt for a new tax regime. This zero-tax liability is possible even without claiming any deduction. 

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


Up to Rs 3,00,000


Rs 2,50,000 – Rs 5,00,000


Rs 3,00,000 – Rs 6,00,000


Rs 5,00,000 – Rs 10,00,000


Rs 6,00,000 – Rs 9,00,000


Rs 10,00,000 and beyond


Rs 9,00,000 – Rs 12,00,000




Rs 12,00,000 – Rs 15,00,000




Rs 15,00,000 and beyond


Tax Saving Under New Regime (FY 2023-24) 

Although you can use various exemptions and deductions under the old tax regime, you can balance that with the Tax Rebate under Section 87A in case you opt for the new tax regime. 

The tax rebate limit under Section 87A has been increased from FY 2023-24. It was previously set at Rs.12,500 for income up to Rs. 5 lakhs. However, in the case of a new tax regime, the tax rebate has been increased to Rs 25,000 if the taxable income is less than Rs 7,00,000 and continues to be Rs.12,500 on income up to Rs 5 lakh under the old tax regime. 

You can claim these deductions in the new tax regime:

  • Standard deduction of Rs 50,000 for salaried individuals
  • Section 80CCD(2) - Employer's contribution to NPS
  • Section 80CCH: Investment in the Agniveer Corpus Fund
  • Section 57(iia) - Family Pension received.
  • 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)
  • 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.

Tax Saving Under Old Regime Tax (FY 2023-24) 

if you opt for the old tax regime, you can avail of tax deductions and exemptions under various sections of the Income Tax Act. 

Here is a list of some of the allowable deductions applicable in the case of the old regime:

  • Section 80C: Exemption of up to Rs. 1.5 lakh on investments made in pension funds, mutual funds, ULIPs, government savings schemes, life insurance premiums, home loan principal amount, education fees, etc. 
  • Section 80CCD: Additional exemption of Rs. 50,000 if you invest in the National Pension Scheme. 
  • Section 80D: Tax deduction on health insurance premium payments made towards self or parents. 
  • 80TTA: Deduction on Savings account interest. 
  • 80G: Donations to charitable organisations
  • Professional Tax Deduction under section 16
  • Exemption under Section 10 is allowed for the below
    • House Rent Allowance
    • Relocation Allowance
    • Leave Travel Allowance
    • Mobile Reimbursement

Example Under Old and New Tax Regime Tax For 7 Lakh Salary

Mr. A has a salary income of Rs 7,50,000 in FY 2023-24. He is eligible for an HRA exemption of Rs 50,000. Section 80C of RS 1,50,000. Now compute tax liability under the old and new tax regime. Which will be the best tax regime to choose for him?


Old tax regime

New tax regime

Gross Salary u/s 17(1)



Less: Exemption u/s 10


HRA Exemption


Less: Deduction u/s 16


Standard deduction



Income under the Head Salary



Less: Deduction under Chapter VI-A


Section 80C


Net Total Income



Income Tax



Less: Rebate u/s 87A



Tax Liability (Including Cess)



In the above example, the tax liability paid for income for the salary of Rs 7.5  lakh is zero. In the old regime, with available deductions, the tax liability is zero and under the new tax regime, even without claiming a deduction, the tax liability paid is zero. Thus, it is a point of indifference so Mr A can select either the new or old tax regime. 

However, if he opts for the old tax regime, he will have to file Form 10-IEA before filing of income tax return (such a Form needs to be submitted only If he has business income and this is not applicable if you are filing ITR 1 or 2).

Pay Zero Tax On a 7 Lakh Salary? 

If you earn Rs 7 lakh, opting for the new regime will benefit you because of the tax rebate. However, if you opt for the old tax regime, you must make some investments to avail of deductions and exemptions. 

Final Word

Under the old tax regime, to reduce your tax liability, you can invest in tax-saving instruments like the Employee’s Provident Fund, Public Provident Fund, National Pension Scheme, Sukanya Samridhhi Yojana, Equity Linked Savings Scheme etc. If you opt for a health insurance policy, whether for yourself or your children or parents, you can claim tax relief.

Under the New Tax Regime, there are very limited options to claim deductions like Standard deduction, NPS Contribution by employer, Gratuity, and Leave encashment exemption.

Thus, a comparative analysis between the new and old tax regimes is essential to identify the best option for you.

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Frequently Asked Questions

What are the eligible deductions under section 80C of the Income Tax Act of 1961?

The eligible investments and payments under Section 80C are life insurance premiums, public provident fund contributions, Equity Linked Savings Scheme investments, Sukanya Samridhhi Yojana contributions, Senior Citizens Savings Scheme investment, Five Year Bank Deposit, home loan principal repayment and National Savings Certificate contribution.

What is the limit for deductions under section 80D?

If you are paying premiums for yourself, the maximum limit for a tax deduction on health insurance premiums is Rs.25,000. If you pay the premium for yourself and your parents below 60 years, the deduction amount is Rs.50,000. If they are in the senior citizen category, the deduction amount shoots up to Rs.75,000. 

What are the deductions under Section 80E?

Under Section 80E of the Income Tax Act, you can claim a tax deduction on interest payments on loans for higher education.

What is the Agniveer Corpus Fund under the Agnipath scheme?

The Agnipath scheme was introduced by the Ministry of Defence in 2022 for enrolling Agniveers in the Indian Armed Forces. The Agniveer Corpus Fund is a provident fund account where Agniveers would contribute a part of their remuneration, which the Government would match. 

What comes under relocation allowance?

Car transportation costs, car registration charges, train/air tickets, packaging charges, accommodation charges, brokerage amount paid on rented houses and school admission charges after relocation are the components of a relocation allowance.

Which tax regime is better for Rs. 7 lakhs salary ?

For a Rs 7 lakhs salary, the new tax regime will be the better option. Since tax liability under new tax regime on Rs 7 lakhs salary is zero.

What is inhand salary for Rs 7 lakhs salary ?

Your in hand salary for Rs 7 lakhs will depend upon the CTC , PF contribution , PT deduction , TDS deduction. You can use our in hand calculator to compute the same.

About the Author

A manager by day and a sloth by night. I enjoy writing on topics like personal finance and investments. With 10 years of experience in fintech, creating content that resonates with readers is my forte. Read more


Quick Summary

The FY 2023-24 Budget introduced significant tax reforms, offering tax rebates on incomes up to ₹7 lakhs under the new tax regime. Various exemptions and deductions are available. Taxpayers with incomes below ₹7 lakhs will have zero tax liability under the new regime. Differences between the old and new tax regimes include updated tax slabs and rebate amounts. Tax-saving strategies vary between the two regimes, requiring careful evaluation for the best choice.

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