The Income Tax Department in India levies income taxes on individuals based on their tax bracket. Taxpayers are always looking for ways to avoid paying income taxes. They do not, however, benefit from salary optimization. As a result, your tax obligations rise in tandem with your earnings.
Fortunately, under Indian income tax laws, there are several ways to reduce your tax liability. Tax-saving investments are one of the most effective and profitable ways to reduce your tax liability.
If you want to pay no tax on a 10-lakh income, read this blog. This blog offers various pieces of tax planning advice for salaries above 10 lakhs.
Income Tax Slabs for Individuals Under the Old Vs New Income Tax Regime
Let us first look at the various tax structures and how to choose between old and new tax structures.
The income tax slab rates for the old and new income tax systems are as follows-
|Annual Income||Old Tax Regime||New Tax Regime|
|Up to Rs 2.5 lakhs||Nil||Nil|
|>2.5 lakhs – Rs 5 lakhs||5% (however, full rebate)||5%|
|>5 lakhs – Rs 7.5 lakhs||20% + Rs. 12,500||10% + Rs.12,500|
|>7.5 lakhs – Rs 10 lakhs||20% + Rs. 12,500||15% + Rs.37,500|
|>10 lakhs – Rs 12.5 lakhs||30% + Rs 1,12,500||20% + Rs.75,000|
|>12.5 lakhs – Rs 15 lakhs||30% + Rs 1,12,500||25% + Rs.1,25,000|
|>15 lakhs and above||30% + Rs 1,12,500||30% + Rs.1,87,500|
How to Reduce Tax on 10 Lakhs Salary
To save more on income tax for 10 lakhs, you should understand your salary structure.
A salary qualifies for a number of grants and tax breaks. Taxable Income is the portion of a salary that is subject to taxation and is not exempt from it. As a result, your salary component may include various tax-free benefits. As a result, your taxable income will be the remainder of your salary.
Salary − Exemptions = Taxable Salary Income
Net Taxable Income = Taxable Salary Income – Deductions
As a result, maximizing your tax exemptions and deductions can help you reduce your tax burden.
Salary Exemptions Permitted Under Income Tax
Several salary components qualify for Tax Exemptions, including-
|3.||HRA or House Rent Allowance||Tax Exemption Up to A Specific Extent|
|4.||LTA or Leave Travel Allowance||Exemption of Travel Ticket Costs for 2 Trips in 4 years Under 10(5)|
|5.||Mobile/Internet Allowance||An Exemption is Allowed If Utilized Primarily for Office Purposes Along with Submitted Proofs or Bills|
|6.||Education Allowance for Children||Per Child, ₹4800 and a Maximum of 2 Children|
|7.||Food Allowance||₹50 Per Meal and a Maximum of 2 Meals a Day|
|8.||Standard Deductions||₹50,000 Will be Given to Everyone Without Restrictions|
|9.||Professional Tax||It varies from State to State but Typically is ₹2,400|
Income Tax Allowable Salary Deductions
If you’re wondering how to save tax on a salary over 10 lakhs, you should know that several salary components qualify for Tax Deductions when you plan your taxes for a salary over 10 lakhs, including-
|1.||On Policy Premium of Your Health Insurance (Under Section 80D)||Tax Deductions of ₹25,000 for you, your Spouse, and any dependent children and ₹25,000 for Parents, along with ₹50,000 if aged 60 and above|
|2.||On Loan for Higher Education (Under Section 80E)||Loans are taken for the higher education of you, your Spouse, your dependent Children, or a Student over whom you have legal custody and are subject to an interest deduction for 8 years beginning with the year of repayment|
|3.||Charity Donations (Under Section 80G)||50%-100% of the amount that qualifies|
|4.||Investments are Made in Tools of Tax Saving (Under Section 80C)||A yearly tax benefit of ₹1,50,000. You have a variety of assets to choose from, including the Employees Provident Fund (EPF), Public Provident Fund (PPF), Equity Linked Savings Scheme (ELSS), Sukanya Smriddhi Yojana (SSY), National Savings Certificate (NSC), Fixed Deposit for 5 Years, and more|
|5.||On Disabled Dependent Treatment Cost (Under Section 80DD)||You are eligible for tax relief of ₹75,000 on a 40% disability and ₹1,25,000 on an 80% disability if you have dependents with disabilities for whom you pay medical expenses|
|6.||Deductions are Available on Home loans||Deductions of up to ₹1.5 lakhs in Principal Amount under Section 80C and up to ₹2 lakhs in Interest Amount under Section 24b|
|7.||Life Insurance Policy Maturity Amount||The maturity profits are tax-exempt if the sum assured is 20% for policies issued before April 1, 2012; 10% for policies issued after April 1, 2012; and 15% for policies issued for people with disabilities or diseases after April 1, 2013|
How to Save Tax on a Salary of More Than 15 Lakhs
You can save tax on salaries above 15 lakhs by investing in various investment options under various sections of the Income Tax Act. It is possible to do so by investing in ELSS mutual funds, ULIPs, EPFs, term plans, and so on.
To summarize, sticking with the old tax system and taking advantage of all available deductions and exemptions on tax-saving investments is the best way to reduce your tax liability if you earn more than Rs. 10 lakh. You can also file your income tax return under the new tax system. However, once chosen, you will be unable to take advantage of any carried-forward losses or tax-saving investment deductions. As a result, carefully considering all aspects of your income is advised.
We hope this blog has helped you better understand the tax deduction and exemption aspects of income tax, as well as how you can reduce your tax liability if you owe more than 10 lakh in income tax.
**Disclaimer: This blog is solely for educational purposes. The securities/investments quoted here are not recommendatory.
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