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Tata Capital > Blog > Generic > How to Save Tax for Salary Above 10 Lakhs?

Generic

How to Save Tax for Salary Above 10 Lakhs?

How to Save Tax for Salary Above 10 Lakhs?

Reaching the 10 lakh salary milestone is a big achievement. It allows you to move closer to your goals, increase your savings, and enjoy more disposable income. However, a higher income also comes with an increased tax liability.

If you don’t optimise your finances carefully, you can pay a big chunk of your income as taxes.

Wondering how to save tax on 10 lakh salary? We’ve got you covered. In this article, we’ll share practical tips to help you lower your tax liability and boost savings.

How to Save Tax if your Salary is Above 10 Lakhs?

Understanding how to save tax for a salary above 10 lakhs requires carefully using the exemptions, deductions, and investment options that offer tax relief. Follow these tips to lower your tax burden:

1. Select the Correct Income Tax Regime

One of the most crucial steps in how to save tax for a salary of 10 lakhs is choosing the right income tax regime. The government allows taxpayers to choose between the old and new tax regimes, both offering different tax rates and benefits.

Tax slabs under the old scheme for FY 2025-26:

Up to Rs. 2.5 lakhsTax-free
Rs. 2.5 lakhs – Rs. 5 lakhs5%
Rs. 5 lakhs – Rs. 10 lakhs20%
Above Rs. 10 lakhs30%

Tax slabs under the new scheme for FY 2025-26:

Up to Rs. 4 lakhsTax-free
Rs. 4 lakhs – Rs. 8 lakhs5%
Rs. 8 lakhs – Rs. 12 lakhs10%
Rs. 12 lakhs – Rs. 16 lakhs15%
Rs. 16 lakhs – Rs. 20 lakhs20%
Rs. 20 lakhs – Rs. 24 lakhs25%
Above Rs. 24 lakhs30%

2. Maximise Deductions under Section 80C

If you opt for the old tax regime, you can claim up to Rs. 1.5 lakhs as a tax deduction under section 80C. This section allows deductions for specific investments and expenses, including:

– PPF and EPF contributions

– Investments in equity-linked savings schemes (ELSS)

– Premiums paid for life insurance policies

– Tax-saving fixed deposits

– Investments in National Savings Certificate (NSC) and Sukanya Samriddhi Yojana (SSY)

– Principal repayment on home loans

3. Maximise Deductions under Section 80D

In addition to Section 80C, you can also lower your taxable income by claiming deductions under Section 80D. Under the old tax regime, you can claim deductions up to:

– Rs. 25,000 on health insurance premiums covering yourself, your spouse, and your children.

– Rs. 50,000 on health insurance premiums paid for senior citizen parents.

4. Claim Deductions on Home and Education Loans

If you’ve taken a home loan or an education loan, you can claim tax deductions under the old tax regime to lower your taxable income. Here’s how:

– Tax deduction on home loan: You can claim a deduction of up to Rs. 1.5 lakhs under section 80C on the principal repayment amount. Section 24(b) of the Income Tax Act further lets you claim up to Rs. 2 lakhs yearly on the loan’s interest if the property is self-occupied.

– Tax deduction on education loan: You can claim tax deductions on the entire interest paid on the education loan under section 80C. This is applicable for up to 8 years or until the loan is fully repaid.

5. Claim HRA exemption

If you get a house rent allowance (HRA) as part of your salary, you are eligible to claim an HRA exemption under section 10(13A) to reduce your taxable income. The amount of HRA exemption is the least of the following three:

– Actual HRA received from your employer.

– 50% of your basic salary (if living in a metro city) or 40% (living in a non-metro city).

– Actual rent paid minus 10% of your basic salary.

Summing up

While a hefty paycheck comes with increased savings opportunities and a higher disposable income, it can also add to your tax liability. However, careful financial planning and understanding of how to save tax for a salary above 10 lakhs with available deductions can help you significantly lower your taxable income.

To make the most of these tax-saving strategies, consider investing in tax-saving instruments through Tata Capital. Whether it’s ELSS funds, fixed deposits, life insurance, or home loans, Tata Capital offers a range of investment and loan products designed to help you save on taxes while building wealth. Visit Tata Capital’s official website or download the mobile app to learn more.

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