How to Save Tax for Salary Above 10 or 15 Lakhs

The Income Tax Department of India imposes taxes according to your income bracket. There have been a few changes in how this works, considering the recent announcement of Budget 2023.

Those aside, payment obligations still increase with higher annual salaries. This can amount to a significant number for those earning above 10 lakhs to 15 lakhs.

For those wondering about how to save tax on salary packages in that range, there are several available channels. While tax saving investments are the most commonly used examples, individuals can avail of multiple other components.

This article takes a deep dive into the very same. However, before getting into that, let’s establish the fundamentals first.

What are the New Income Tax Rates for the FY 2023-2024?

Before becoming familiar with the available tax saving options, it is crucial to know the revised rates under the new income tax regime. While there are additional conditions attached to the policy changes, the general outline for the tax slab for the FY 2023-2024 is as follows:

What are Some Common Tax Exemption Components & Deductibles?

Regardless of which tax slab category you fall under, your salary structure will consist of multiple components. Some of these are directly exempt from taxation, while other expenses are deductible.

As such, before establishing how to save tax on salary packages above 10,00,000 INR to 15,00,000 INR, you must determine your net taxable amount. This is calculated as follows:

• Gross Salary – Exempt Salary Components = Taxable Income
• Taxable Income – Deductions = Net Taxable Amount

To determine your salary structure, approach your HR department for details regarding the CTC or derive the information from your most recent pay stub.

Nonetheless, aside from minor variations, a typical salary structure will consist of the following:

Apart from the tax exemption components, you can also attribute specific expenses as deductibles. This includes the following:

How to Save Tax for Salary Above 10 Lakhs

Now that you understand the various channels and tools at your disposal let’s look at one of the simplest ways to save tax in India. Consider the example below:

Person X has a gross annual salary of 10,00,000 INR. Under the exempted components, this will include elements such as:

Upon calculation, Person X’s taxable income will amount to 6,92,600 INR. Subsequently, they can make deductions in the following categories:

This would bring the net taxable amount to 4,67,600 INR. Now, considering that the tax slab for the income category of 3,00,000 INR to 6,00,000 INR is 5%, that would mean a tax of merely 23,380 INR. However, since Budget 2023 includes a tax rebate for up to 7,00,000 INR, the total payable amount would essentially be nil.

There are similar tax saving options for salaried employees with annual packages of up to 15 lakhs. While the rebate will not nullify the tax entirely, the amount would still be significantly less than the gross value.

In addition, it is critical to note that, unless specifically opted for, all individuals will be taxed under the new regime. Thus, it is advisable to avail of the maximum number of tax deductions. This is relatively easy to achieve with the help of a Certified Public Accountant (CPA) or a licensed tax preparer.

Wrapping Up

Now that you understand how to save tax on salary above 10 or 15 lakhs. It is crucial to remember that government taxation policies tend to change every year.

As such, it would be best to keep track of the latest updates and recent announcements from the official channels. This will help you plan your tax-saving strategy while eliminating potential liabilities.

It also helps to leverage as many tax-free investments as possible, including EPFs, PPFs, and insurance premium payments. Doing so would allow you to make sizable deductions from your taxable income, resulting in a lower net tax amount.