Smart ways to save tax on a salary above ₹10 lakhs?

Are you wondering how to save tax on a ₹10 lakhs salary? This is a frequently asked question, and fortunately, you can discover the solution right here. The IT Department imposes taxes according to the relevant tax bracket.

While paying tax is the responsibility of every Indian, it is also common for taxpayers to benefit from the available deductions and exemptions and reduce the tax liability. During a financial year, salaried individuals can opt for either: 

• The old tax regime
• The new tax regime 

This way, you are allowed to claim exemptions or deductions based on the old regime or follow the new structure and forgo most of the exemptions. Points to note:

• You can continue to avail deductions such as Section 80C, 80D and more when you opt for the old tax regime
• You cannot claim most of your tax deductions by opting for the new regime, even though it offers comparatively lower tax rates

Read on to learn how to save tax on a ₹10 lakhs salary and more.

Understand Your Salary Structure

You must be well-informed of your salary structure before thinking about how to save tax on salary. If you are opting for the old regime, knowing this component forms a crucial part of the process. Simply put, your total salary minus the exemptions forms your taxable salary income.

The difference of this taxable income with deductions is your net taxable income. So, you can enjoy maximum tax benefits through these deductions and exemptions. Once you understand the salary structure, it becomes easier for you to compare both tax regimes to help you save tax. 

Also Read: Best 10 Tax-saving Investments

Assess the Scenario if You Opt for the Older Tax Regime

If you are wondering how to save tax on salary using the old tax regime, you need to understand the salary component, as mentioned. A few exemptions you are allowed to claim from your salary income include:

• House rent allowance or HRA
• Leave travel concession or LTC
• Standard tax deduction of ₹50,000
• Office and personal allowance
• Professional tax

You may also have generated other interest earnings from: 

• FDs
• Dividends
• Rent

You need to factor these in apart from your salary income. To help you understand how to save tax on a ₹10 lakhs income, here is a hypothetical example.

Details	Amount (₹)
Total salary	₹10 lakhs
Deductions:
HRA exemption	₹2 lakhs
Standard deduction	₹50,000
Net income	₹7.5 lakhs
Additions:
Interest earnings from investments	₹10,000
Gross taxable income	₹7.6 lakhs

Disclaimer: Aforementioned values are arbitrary and have been used for illustration purposes only.

In case you have availed of a home loan, you can claim the interest of up to ₹2 lakhs under the income from the house property head u/s 24 of the IT Act.

From the gross taxable income, you need to claim certain deductions to arrive at the net taxable income. Here’s a simple example:

Details	Amount (₹)
Gross taxable income	₹7.6 lakhs
Deductions:
Section 80C	₹1.5 lakhs
Section 80D	₹50,000
Section 80CCD (1b)	₹50,000
Section 80TTA	₹10,000
Net taxable income	₹5 lakhs
Income tax payable	₹12,500
Reduce rebate under Section 87A	₹12,500
Cess on the income tax amount	0
Final tax amount	0

Disclaimer: Aforementioned values are arbitrary and have been used for illustration purposes only.

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Assess the Scenario if You Opt for the New Tax Regime

If you choose the new tax regime, you are not eligible to claim certain deductions. In this case, you can calculate the total tax payable on your total gross taxable income.

As per the new tax regime, you can claim a new deduction as per Section 80CCD (2).

• This is applicable if your employer has made an NPS contribution to your salary account
• As a private sector employee, you can claim a maximum deduction of 10% of your salary
• An employee working in the public sector can claim a 14% deduction

As there are no common deductions, such as HRA and LTA, your total gross taxable income becomes higher according to the new structure. This ultimately results in a higher tax outgo. 

Here is an example to help you understand the new regime:

Details	Amount (₹)
Gross taxable income	₹10 lakhs
Deductions:
HRA exemption	0
Standard deduction	0
Professional tax	0
Standard deduction	₹50,000
Net taxable income	₹9.5 lakhs
Final tax amount	₹54,600

Disclaimer: Aforementioned values are arbitrary and have been used for illustration purposes only.

What are the Exemptions from Salary?

Check out the available exemptions from salary:

Element	Tax Rules
Basic Salary	Completely taxable
Dearness Allowance	Completely taxable
HRA or House Rent Allowance	Tax Exemption up to a limit
LTA or Leave Travel Allowance	Exemption of costs of travel tickets for 2 trips in 4 years u/s 10(5)
Mobile/Internet Allowance	Exemption in case of primary utilisation for office purposes after submitting bills or proof
Education Allowance for Children	₹4800 per child with a cap of 2 children
Food Allowance	₹50 per meal with a cap of 2 meals per day
Standard Deductions	₹50,000 without any restrictions
Professional Tax	₹2,400 (varies from state to state)

You can enjoy tax benefits when you use a personal loan amount for specific reasons such as:

• Meeting education expenses
• Purchasing, constructing or renovating your home

If you are planning to opt for a Personal Loan, you can do so easily on Fibe. Download our Instant Loan App and avail a maximum loan amount of up to ₹5 lakhs. You can get the required funds within minutes after approval at competitive interest rates. 

FAQs on How to Save Tax for Salary Above ₹10 Lakhs

How can I avoid tax on a salary above ₹10 lakhs?

You can avoid tax by:

• Understanding the salary component properly
• Assessing both old and new tax regimes

How much tax do I pay on a ₹10 lakhs salary?

The tax amount depends on:

• Your gross taxable income after deductions
• Whether you choose an old or new tax regime

How to pay zero tax on a ₹10 lakhs income?

You can pay zero tax if you opt for the older tax regime, provided you claim the deductions and exemptions accurately. 

How can I reduce my salary tax?

You can reduce tax on your income by investing in Section 80C applicable products, like:

• NPS
• LIC
• PPF
• Tax-savings FDs
• Claiming HRA
• Claiming home loan interest deductions

How much income is tax-free according to the Income Tax Act?

Under the new tax regime, there is no tax levied for income up to ₹3 lakhs in FY 24-25.