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Smart Tax-Saving Techniques for a Salary of Rs. 10 Lakhs

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Tax-Saving Techniques for a Salary of Rs. 10 Lakhs
February 16, 2024

For salaried Indians, a high salary means a greater disposable income, and better chances to save and invest. However, tax liabilities can eat away at these benefits since in India income tax depends on the tax bracket one belongs to. So, if you earn a salary of Rs. 10 Lakhs, you might end-up paying a significant part of your annual earnings as taxes. Thankfully, you can avoid this with the few savvy tax-saving tips we’ve outlined below.

But to save on taxes, you must first understand your salary structure. Here’s a quick overview to simplify this:

  • Taxable Salary Income = Salary minus Exemptions 

  • Net Taxable Income = Taxable Salary Income minus Deductions

This means that to lower your tax burdens, you need to find ways of maximising exemptions and deductions. Here’s how you can go about it:

1.Choosing the Right Tax Regime

The following comparison shows that you pay a 30% tax on your Rs. 10 Lakh salary under the old regime and only 20% under the new tax regime. However, most of your exemptions and deductions are not applicable under the new regime. This increases taxable income, making the old regime a smarter tax-saving choice. 

The income tax slabs and applicable tax rates for FY 2023-24 (AY 2024-25) is as follows:

Under Old Regime

Under New Regime

Annual Income

Tax Rate

Annual Income

Tax Rate

Up to Rs. 2.50 Lakhs

Nil 

Up to Rs.3 lakhs

Nil 

Rs. 2.50 Lakhs-Rs. 5 Lakhs

5% 

Rs. 3 lakhs to Rs.6 lakhs

5%

Rs. 5 Lakhs-Rs.  10Lakhs

20%

Rs.6 lakhs to Rs.9 lakhs

10%
   

Rs.9 lakhs to Rs.12 lakhs

15%

Above Rs. 10 Lakhs 

30%

Rs.12 lakhs to Rs.15 lakhs

20%
   

Above Rs.15 lakhs

30%

2. Maximise on Section 80(C) Deductions 

You can claim tax deductions of up to Rs. 1.5 Lakhs u/s 80(C) for ELSS, EPF, PPF, SSY, tax-saver FDs, and NSC investments. You can also buy pension plans to secure your retirement years and enjoy deductions u/s 80(CCC) if the plan is eligible for such deduction . Other than that, securing yourself with insurance plans also helps you avail deductions on the premiums paid under this section. 

3. Take Advantage of the HRA Exemption

Under the old tax regime, you can claim exemption of HRA or House Rent Allowance to reduce taxable income levels under section 10(13A) of Income Tax Act,1961. The exemption available is prescribed under rule 2A of the said Act which is least of the following:

  1. Actual HRA received
  2. Actual rent paid minus 10% of salary
  3. 50% of your basic salary if you live in a metro city. 
  4. For non-metros, the limit is 40% of your basic salary. 

4. Claim 80(D) Deductions on Health Insurance Premiums

U/s 80(D), you can claim deductions of Rs. 25,000 (up to Rs. 50,000 if  insured is senior citizen) on health insurance premiums. Deduction is available for self, spouse, children and parents. 

5. Utilise Tax Deductions on Loans

You can claim deductions on the principal u/s 80(C) if you have an ongoing home loan subject to a maximum of Rs.1.5 lakhs. Interest payments up to Rs. 2 Lakhs qualify for deduction u/s 24(b) subject to certain specified conditions. Similarly, you can reduce your taxable income further by claiming deductions on education loan interest payments (applicable for the first eight years) u/s 80E

You can also claim various other exemptions and deductions, if applicable to you, that are otherwise not allowed under the new regime.

The Bottom Line

Opting for the old tax regime can help you capitalise on exemptions and deductions if you have a salary of Rs. 10 Lakhs. Investing in tax-saving instruments allows you to claim tax benefits and reap high returns. Buying ULIP plans, ELSS mutual funds, or investing in EPF can help you create a long-term corpus without adding to your tax burden. Overall, picking the best investment options and the right tax structure can bring you more savings.

Related Articles: 

ARN- INT/ED/09/23/4551

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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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Author Profile Written By:
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. 

# This material has been prepared for information purposes only, one should not be relied on for tax or accounting advice. 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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