Implementing the right eligibility-based deductions can mean the difference between paying high taxes and or emerging tax-free. When planned smartly, those earning ?10 lakhs annually can gain no-tax status and retain over ?8 lakhs in hand per year.
Read on to discover actionable tips to save tax on salary through strategic financial management. Equipped with this expertise in navigating tax rules and exemptions, high-salary professionals can continue advancing in their careers while maximising in-hand earnings.
This section will break down the income slabs and corresponding tax rates under both structures, empowering you to determine which works better for your specific financial situation.
The income tax slab rates for the old and new income tax systems are as follows-
Income Tax Slabs | Old Tax Regime | New Tax Regime | |||
Under 60 years of age and NRI | Above 60 and below 80 years | More than 80 years of age | FY 2022-2023 | FY 2023-2024 | |
?0 to ?250000 | NIL | NIL | NIL | NIL | NIL |
?250000 to ?300000 | 5% | NIL | NIL | 5% | NIL |
?300000 to ?500000 | 5% | 5% (tax rebate u/s 87A is available) | NIL | 5% | 5% |
?500000 to ?600000 | 20% | 20% | 20% | 10% | 5% |
?600000 to ?750000 | 20% | 20% | 20% | 10% | 10% |
?750000 to ?900000 | 20% | 20% | 20% | 15% | 10% |
?900000 to ?1000000 | 20% | 20% | 20% | 15% | 15% |
?1000000 to ?1200000 | 30% | 30% | 30% | 20% | 15% |
?1200000 to 1250000 | 30% | 30% | 30% | 20% | 20% |
?1250000 to ?1500000 | 30% | 30% | 30% | 25% | 20% |
Above ?1500000 | 30% | 30% | 30% | 30% | 30% |
Understanding how various salary components get taxed or exempted is key to planning savings on a ?10 lakhs package. When evaluating the best tax saving options for salaried individuals, it helps to break down your annual remuneration into main categories. Broadly, your annual salary consists of:
The math works like this:
Taxable Income
Therefore, to reduce tax liability, the goal is to:
Structuring your ?10 lakh remuneration through permitted exemptions and deductions allows you to emerge tax-free potentially.
Those earning high salaries can minimise their tax liability by fully utilising permitted exemptions. Certain elements of your compensation package fall under non-taxable components, while other portions get fully taxed.
This breakdown clarifies the tax status of key salary elements:
When exploring how to save tax on salary above ?10 lakhs, numerous components can qualify for deductions and reduce your tax liability.
High-income professionals with generous salaries above ?15 lakhs have even further scope to minimise their tax outgo by leveraging permitted deductions. Strategic investments in tax-saving instruments allow those in the highest tax bracket to reduce their tax liability.
Some popular investment avenues to claim deductions include:
Carefully investing in such tax-saving financial products, as per one's risk appetite and goals, can help high earners making over ?15 lakhs annually bring down their taxable income considerably.
To minimise taxes on salaries above ?10 lakhs, the optimal approach is to select the old tax regime and fully tap into all available exemptions and deductions. Making tax-saving investments as per Section 80C and Section 80D allows you to reduce taxable income under the old system.
Alternatively, one can opt for the new simplified tax structure. However, this would mean preceding tax benefits on expenses like home loans as well as losses carried forward and deductions claimed previously. Hence, analysing all aspects of your financial situation is advisable before picking one structure over the other.
Guiding Wealth Creation since 1995
We've been ranked as Indiaβs No. 1 Retail Broker by Asiamoney Brokers Poll 2023. Here, we bring you the latest in the world of Trading and Investments in our effort to Make the Markets work for YOU!
