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Tata Capital > Blog > Generic > How to Save Tax for Salary Above 20 Lakhs?

Generic

How to Save Tax for Salary Above 20 Lakhs?

How to Save Tax for Salary Above 20 Lakhs?

The ever-shifting nature of India’s tax regime can make it challenging to keep up with all the changes and make tax filing an overwhelming and confusing task. It can make it harder to keep track of all the ways in which you can maximise your tax savings.

If you earn an annual salary above Rs. 20 lakhs, careful analysis of the old and new tax regimes and smart tax planning will help you cut down on payable tax and save money.

This article will explore how to save tax for salary above Rs. 20 lakhs so that you can get the most out of your hard-earned income.

Budget 2025: Key Updates 

The new tax regime introduced in the 2025-26 Union Budget has brought some key changes to income tax rates and deductions.

Specifically, it has lowered the income tax rates for Rs. 20 lakh salary bracket, bringing much-needed financial relief to citizens in this tax bracket.

The following table illustrates the updated income tax rates for the fiscal year 2025-26 according to the new tax regime:

Total income in rupeesRate of tax
Up to 4 lakhs0%
4 to 8 lakhs5%
8 to 12 lakhs10%
12 to 16 lakhs15%
16 to 20 lakhs 20%
20 to 24 lakhs25%
Over 24 lakhs30%

Tax Slab Comparison: Old vs New Tax Regime

While the new tax regime offers lower tax rates, you can still opt for the old tax regime if the deductions and exemptions claimed under it help you save more tax on Rs. 20 lakhs salary.

Here is a comparison of the tax rates according to the old vs new tax regimes:

Total income in rupeesTax rate in the old regimeTax rate in the new regime (2025)
Up to Rs. 2.5 lakhs0%0%
Rs. 2.5 lakhs – Rs. 4 lakhs5%0%
Rs. 4 lakhs – Rs. 8 lakhs5%5%
Rs. 8 lakhs – Rs. 12 lakhs20%10%
Rs. 12 lakhs – Rs. 16 lakhs30%15%
Rs. 16 lakhs – Rs. 20 lakhs30%20%
Rs. 20 lakhs – Rs. 24 lakhs30%25%
Over Rs. 24 lakhs30%30%

How to Save Tax For on Rs. 20 Lakhs Salary

If you have an annual income of Rs. 20 lakhs or more, you can use the following tips to maximize your tax savings:

1. Utilise tax deductions under Section 80C to their fullest extent. Section 80C allows deductions up to Rs. 1.5 lakhs for taxpayers who have certain tax-saving investments and expenses, such as National Savings Certificate (NSC), Equity Linked Savings Scheme (ELSS), Public Provident Fund (PPF), and Employee Provident Fund (EPF).

2. Invest in health insurance policies to avail tax deductions under Section 80D. Section 80D can reduce your tax liability by up to Rs. 25,000. For senior citizens (people aged 60 or above), this amount has been increased to Rs. 50,000.

3. If you live on rent exceeding 10% of your basic salary, you can avail of the House Rent Allowance (HRA) tax exemption.

4. Under Section 24, you can avail of a tax deduction of up to two lakh rupees on the interest paid on a home loan on any rental income.

5. Under Section 80CCD(1B), you can qualify for tax deductions up to Rs. 1.5 lakhs by investing in the National Pension Scheme.

6. Under Section 80C, you can claim tax deductions on any expenses towards your professional development, including courses and training programs you’ve taken in your line of work.

7. Section 80E allows you to claim deductions up to Rs. 1.5 lakhs on education loans that you take out for yourself or your dependents for a maximum period of eight years.

8. Your employer may provide you with a Leave Travel Allowance (LTA) for travel expenses incurred while you are on leave. Tax exemptions on LTA can be claimed twice in four financial years.

9. Under Section 80G, you can claim a tax deduction on donations to registered charitable organisations, including religious and political organisations.

Wrapping Up

Careful tax planning and complete analysis of your salary according to the old vs. new tax regime can help you determine how to save tax on salary income of Rs. 20 lakhs. 

Learn how to plan your taxes the smart way with Tata Capital’s handy guide on tax on Rs. 15 lakhs income, and invest your extra savings in Tata Capital’s flexible personal loans at attractive interest rates. 

Tata Capital’s convenient home loan with minimal documentation and digital application process will set you on the path to homeownership today.

To learn more, check the Tata Capital website or download the app.

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FAQs

Which tax regime is better for 20 lakhs?

The tax regime that is better for 20 lakhs will depend on the exemptions and deductions you are eligible for. You will need to thoroughly analyse your income status and investments to find the best fit for you. The new tax regime may benefit you more as it has lower tax slabs for 20 lakh salary.

How to reduce tax on 20 lakhs salary?

Careful tax planning can help you determine how to save tax for salary 20 lakhs and reduce tax liabilities. You can reduce tax on 20 lakhs salary by availing various deductions and exemptions you are eligible for, including standard deduction, deductions under Section 80C (PPF, ELSS, LIC, etc.), deductions under Section 80D (medical insurance premium), and HRA exemption u/s 10(13A).

What tax slab applies to a salary above 20 lakhs?

A 30% tax slab is applicable on a salary above 20 lakhs under the old tax regime. Under the new regime, a tax slab of 25% applies on salary of 20 lakhs to 24 lakhs, while 30% income tax is applicable on salary over 24 lakhs.

Can you pay zero tax on a 20 lakhs salary?

It is rare to pay zero tax on a 20 lakhs salary. However, smart use of all the tax deductions and exemptions you qualify for can help you maximise tax savings and cut down on tax liabilities as much as possible.
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