How to Save Tax on a 10 Lakh Salary in India
When you hear the term “10 lakh salary”, it evokes excitement and aspirations. However, the enthusiasm often fades when you see how much is deducted in taxes before the money reaches your account. Strategic tax planning can help you keep more of your hard-earned income.
Bajrang Sharma 
When you hear the term “10 lakh salary”, it evokes excitement and aspirations. However, the enthusiasm often fades when you see how much is deducted in taxes before the money reaches your account. Strategic tax planning can help you keep more of your hard-earned income.
If you earn ₹10 lakhs or more annually, this article will guide you through practical steps to reduce your tax liability effectively. From understanding salary structures to choosing the right tax regime, here’s everything you need to know.
Save Tax on 10 Lakh Income: 5 Easy Steps
To save taxes, you must first decode your salary structure and understand the available tax-saving tools. Let’s explore this step-by-step:
1. Understanding Your Salary Structure
Your salary comprises multiple components like basic pay, allowances, and reimbursements. Each component has unique tax implications. Understanding which parts are taxable and which qualify for exemptions is crucial.
Key Formula:
Taxable Salary Income = Total Salary - Exemptions
Net Taxable Income = Taxable Salary Income - Deductions
By optimizing exemptions and deductions, you can significantly reduce your taxable income.
Common Components in a Salary:
- House Rent Allowance (HRA)
- Leave Travel Allowance (LTA)
- Standard Deduction (₹50,000)
Let’s dive deeper into exemptions and deductions in the next sections.
2. Choose the Right Tax Regime
India’s income tax system offers two regimes: Old Tax Regime and New Tax Regime. Both have distinct benefits, and selecting the right one can make a substantial difference.
Tax Slabs for FY 2024-25
| Income Slab | Old Regime | New Regime |
|---|---|---|
| Up to ₹3 lakh | Nil | Nil |
| ₹3 lakh - ₹7 lakh | 5% | 5% |
| ₹7 lakh - ₹10 lakh | 20% | 10% |
| ₹10 lakh - ₹12 lakh | 30% | 15% |
| ₹12 lakh - ₹15 lakh | 30% | 20% |
| More than ₹15 lakh | 30% | 30% |
Comparison of Regimes
- Old Regime: Allows multiple deductions and exemptions like HRA, LTA, and Section 80C.
- New Regime: Simplified structure with lower tax rates but limited deductions.
Pro Tip: If your salary structure includes many exemptions, the Old Regime may benefit you more.
3. Maximize Deductions Under Section 80C
Section 80C allows deductions of up to ₹1.5 lakhs annually. Investing in eligible schemes can help you save taxes while growing your wealth.
Popular 80C Instruments:
- Employee Provident Fund (EPF)
- Public Provident Fund (PPF)
- Equity-Linked Savings Schemes (ELSS)
- Life Insurance Premiums
- Principal Repayment on Home Loans
Pro Tip: ELSS funds not only save tax but also offer market-linked returns.
4. Claim Additional Deductions Beyond Section 80C
While Section 80C is the most popular, other sections can further reduce your taxable income.
Section 24 (Home Loan Interest)
- Deduction of up to ₹2 lakhs on interest paid for a self-occupied property.
Section 80D (Health Insurance Premiums)
- ₹25,000 deduction for self and family.
- ₹50,000 additional deduction for senior citizen parents.
Section 80E (Education Loan Interest)
- Deduction for interest paid on loans for higher education (no upper limit).
Section 80G (Donations)
- Donations to eligible charities are deductible.
5. Leverage Exemptions Under Section 10
The Old Regime provides various exemptions under Section 10. Let’s explore some common ones:
House Rent Allowance (HRA)
HRA is partially exempt, depending on your city of residence and rent paid.
Leave Travel Allowance (LTA)
Exempts the cost of travel tickets for domestic trips (two trips in a block of four years).
Gratuity
Tax-free up to ₹20 lakhs on retirement or resignation.
Mobile/Internet Reimbursement
Reimbursements for work-related expenses are tax-free.
Food Allowance
₹50 per meal for up to two meals per working day (₹26,400 annually).
Tax Planning for a 10 Lakh Salary: A Practical Example
Let’s consider an individual earning ₹10 lakhs annually under the Old Tax Regime. Here’s how deductions and exemptions can reduce their tax liability:
Gross Salary: ₹10,00,000
Exemptions:
- HRA: ₹1,00,000
- LTA: ₹30,000
Deductions:
- Standard Deduction: ₹50,000
- Section 80C: ₹1,50,000
- Section 24 (Home Loan Interest): ₹2,00,000
Net Taxable Income = ₹10,00,000 - (₹1,00,000 + ₹30,000 + ₹50,000 + ₹1,50,000 + ₹2,00,000) = ₹5,70,000
Tax Payable = ₹13,500 (as per Old Regime slabs).
Key Tax-Saving Strategies for 2024
- Optimize Salary Structure: Request your employer to include allowances like HRA, LTA, and reimbursements.
- Invest Wisely: Choose tax-saving instruments under Section 80C and 80D.
- Switch Regimes Strategically: Reevaluate your tax regime choice annually based on changes in income and exemptions.
- Claim Rent Deductions: If HRA isn’t part of your salary, claim rent under Section 80GG.
- Stay Informed: Tax laws change frequently, so keep updated with new deductions and exemptions.
Conclusion
Earning a 10 lakh salary need not mean giving away a significant portion to taxes. By understanding your salary structure, maximizing deductions, and choosing the right tax regime, you can reduce your tax liability significantly.
Smart tax planning not only increases your take-home pay but also ensures long-term financial security. Take charge of your finances today to save more tomorrow!
