How to save tax on a salary above ₹10 lakhs?

  • Updated on: 20 Oct 2023
  • Published on: 17 Jul 2023
How to save tax on a salary above ₹10 lakhs?

Are you looking for ways to minimise taxes on a salary above ₹10 lakhs? This is a frequently asked question and fortunately, you can discover the solution right here. As you may already know, the Income Tax Department imposes taxes on an individual’s earnings according to the relevant tax bracket.

While paying tax is the crucial responsibility of every Indian citizen, it is also common for taxpayers to search for measures to reduce the tax incurred on their salary. During a financial year, salaried individuals can either opt for the old tax regime or comply with the new tax structure. 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.

You can continue to avail deductions such as Section 80C, 80D and more when you opt for the old tax regime. 

However, you cannot claim most of your tax deductions by opting for the new regime, even though it offers comparatively lower tax rates. 

With the new tax regime in action from April 1, 2020, as a salaried individual, you need to choose between the regimes every financial year. While you can switch between them, find out how to save tax on a salary above ₹10 lakhs.

Understand your salary structure

Before scratching into nuances of tax on a ₹10 lakhs income, you must be well-informed of your salary structure. 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 income tax on ₹10 lakhs. 

Assess the scenario if you opt for the older tax regime

If you are wondering how to save tax for salary above ₹10 lakhs 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, LTC or leave travel concession or a standard tax deduction of ₹50,000.

You may also have generated other interest earnings from FDs, dividends, etc. 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.

DetailsAmount (₹)
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 component u/s 24 of the Income Tax Act. You can claim a maximum amount of up to ₹2 lakhs under the income from the house property head. 

From the gross taxable income, you need to claim certain deductions to arrive at the net taxable income. Here’s a simple example to help you understand how to save tax on a ₹10 lakhs income by claiming deductions.

DetailsAmount (₹)
Gross taxable income₹7.6 lakhs
Deductions:
Section 80C₹1.5 lakhs
Section 80D₹25,000
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 amount0
Final tax amount0

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

Evaluate the New Tax Regime

If you are opting for the new tax regime to save income tax on ₹10 lakhs, 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. The same goes for 14% if you are an employee working in the public sector.

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. 

So, be aware of both regimes and your salary structure to help you save income tax on ₹10 lakhs.

Are you aware that you can enjoy tax benefits when you use a personal loan amount for specific reasons such as meeting education expenses, purchasing or constructing a home and 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 2 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 and assessing both old and new tax regimes.

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

The amount of tax to pay depends on your gross taxable income after deductions. Whether you choose an old or new tax regime also plays a significant role in the tax you need to pay.

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. You can check the illustration mentioned in the article to understand this better.

How can I reduce my salary tax?

You can reduce tax on your income by investing in Section 80C applicable products, such as NPS, LIC, PPF, tax-savings FDs, etc. or by claiming HRA and home loan interest deductions. 

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

As per the latest income tax slabs for FY23-24, there is no tax levied for income up to ₹3 lakhs.

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