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Tax Savings Strategies for Salary above Rs 30 lakh in India

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Tax Savings Strategies for Salary above Rs 30 lakh in India
February 23, 2024

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Steady growth in salary means a consequent rise in income tax figures too. With the changes made in the new tax regime in Budget 2023, it’s even more difficult to enjoy deductions if you are in a higher salary bracket of more than Rs 7 lakh per annum However, with the option to still follow the old regime, the tax can be reduced if you efficiently utilise various deduction avenues through the best investment plan. Thus, for hefty salary amounts like those above Rs 30 lakh per annum mark in India, having a proper tax savings strategy is essential. 

The basics of a tax savings strategy

As a salaried employee in India, one can claim tax deductions under sections 80C, 80CC and 80CCD. But additionally, there are legal methods to reduce the tax further. According to the Income Tax Act, citizens can save money on taxes through deductions of certain expenses from taxable income.

How to save on taxes for salaries over Rs 30 lakh?

To save taxes, it’s important to know all the possible ways of claiming a deduction. The best investment plan in India is surely the one that effectively utilises these scopes. Here’s how you can avail of every tax benefit.

Deductions under sections 80C, 80CC, and 80CCD: Under these sections, save on taxes by investing in life insurance, ULIP Plan, PPF accounts, pension plans, National Savings Certificates (NSC), Fixed deposits etc. A total deduction of Rs 1.5 lakhs can thus be claimed. Here the best ULIP plans or the best retirement plans can help you reap the maximum tax benefits. One can also buy term insurance for this purpose.

Medical costs: Reduce the payable tax by deducting medical expenses from the taxable income subject to sections 80D and 80DDB. Money spent on health insurance is also eligible for a claim.

Education loan: Section 80E allows you to claim deductions for paying interest on an education loan, taken for yourself, your spouse or your child.

Home loan: Buy a house and get a deduction of the principal amount of your home loan under 80C and of the interest paid under section 24.

House Rent Allowance: The house rent allowance deducted from salaries can be claimed as a deduction.

Leave Travel Allowance: Leave travel allowance (LTA) received from the employer is tax-free. It can be claimed twice in four years to travel anywhere in India.

Capital gains: Get tax deductions for capital gains earned through selling long-term capital assets and investing them in financial instruments.

ELSS Mutual funds: Investment in ELSS mutual funds is another way to save taxes.

By availing the above investment options, an individual with higher salary income can save substantial taxes.

FAQs on how to save tax for salary above 30 lakhs

Q: How to save tax for a salary above 30 lakhs?

Take into account these tactics to reduce taxes on an income over 30 lakhs: 

  • Select the most advantageous tax structure: To find out which tax system offers greater deductions and a smaller tax burden, compare the new and old ones.
  • Maximise deductions under Section 80C: Optimise your Section 80C deductions by investing in tax-saving options like NSC, ELSS, and PPF.Also, the principal repayment of your house loan is available as deduction under Section 80C. Total eligible deduction under Section 80C is up to Rs. 1.5 lakhs.
  • Make use of additional deductions: You can deduct medical costs (Section 80D), student loan interest (Section 80E), donations (Section 80G), Leave Travel Allowance [Section 10(5)], House Rent Allowance [Section 10(13A)] and interest paid on house loan [Section 24(b)].
  • Make long-term wealth development plans: Take into account investing in equity-oriented plans to potentially benefit from capital gains tax.
  • Speak with a tax expert: To maximise tax savings depending on your unique financial circumstances and goals, seek professional counsel.

Q: Which tax regime is better, old or new for 35 lakhs?

The best tax structure for an income of Rs. 35 lakhs is determined by your total amount of deductions. Due to larger tax savings, the old tax regime is often more advantageous if your deductions exceed Rs. 3.75 lakhs. However, the new regime with its lower tax slabs can be beneficial if your deductions are less than Rs. 1.5 lakhs. The issue is more complicated and necessitates a detailed computation of the tax due under both regimes when deductions range from Rs. 1.5 lakhs to Rs. 3.75 lakhs.

Q: What is a take-home salary for 30 lakhs?

In India, a 30-lakh salary usually equates to a take-home pay of 1.8 to 2 lakh rupees a month. However, this amount might differ greatly depending on several variables, such as professional taxes, provident fund contributions, tax deductions, and the particular pay components provided by the employer. It is critical to take these things into account when calculating your take-home earnings.

Q: Is 30 lakhs a good salary in India?

In India, a salary of thirty lakhs a year is regarded as excellent. It puts you in the highest salary category, enabling you to save money and live a comfortable lifestyle. You can afford investments, high-quality kid education, and luxury items. It does, however, also have a hefty tax cost. Organising your taxes well is essential to maximising your discretionary income.

Q: Which tax regime is better for 30 lakhs in CTC?

The new tax system is typically more advantageous if your total tax deductions are less than Rs. 3,75,000 for a CTC of Rs. 30 lakhs. This is due to the fact that the new system delivers reduced tax rates without the convoluted nature of deductions. 

However, the previous system may have been more tax-efficient if you were able to deduct amounts more than Rs. 3,75,000 under it (such as interest paid on a house loan, investments made under Section 80C, etc.). When choosing a choice, carefully consider your financial status and deductions.

Q: What investments qualify under Sections 80C, 80CCC, and 80CCD, and how do they maximize tax savings?

Sections 80C, 80CCC, and 80CCD of the Income Tax Act offer a range of tax-saving opportunities through various investment options. You can claim deductions by investing in life insurance policies; ULIP plans, PPF accounts, pension plans, NSC, and fixed deposits. The total allowable deduction under these sections is Rs 1.5 lakhs, helping you significantly reduce your taxable income. Opting for the best ULIP or retirement plans can further enhance your tax benefits, while term insurance policies also qualify for deductions, offering both financial protection and tax savings.

References

Related Articles:

ARN- ED/09/24/15372

Term Plan Articles Term Plan Articles

Investment Articles Investment Articles

Savings Articles Savings Articles

Life Insurance Articles Life Insurance Articles

Tax Articles Tax Articles

Retirement Articles Retirement Articles

ULIP Articles ULIP Articles

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Child Plans Articles Child Plans Articles

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Francis Rodrigues Francis Rodrigues

Francis Rodrigues has a decade long experience in the insurance sector, and as SVP, E-Commerce and Digital Marketing, HDFC Life, manages the online sales channel, as well as digital and performance marketing. He has had hands-on experience in setting up sales channels and functional teams from scratch over a career spanning 2 decades.

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Vishal Subharwal Vishal Subharwal

Vishal Subharwal heads the Strategy, Marketing, E-Commerce, Digital Business & Sustainability initiatives at HDFC Life. He is responsible for crafting and ensuring successful implementation of the overall organisation strategy.

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Disclaimer

# The above stated income tax slabs and tax benefits, deductions/exemptions are subject to the provisions & conditions mentioned in the existing Income Tax Act, 1961. Tax Laws are also subject to change from time to time.

# It is requested to seek tax advice of your Chartered Accountant or personal tax advisor with respect to your personal tax liabilities under the Income-tax law.

NOTE: The above stated income tax slabs and tax benefits, deductions/exemptions are subject to the provisions & conditions mentioned in the existing Income Tax Act, 1961. Tax Laws are also subject to change from time to time. It is requested to seek tax advice of your Chartered Accountant or personal tax advisor with respect to your personal tax liabilities under the Income-tax law.

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