Summary
If your annual income exceeds Rs. 10 lakhs, you are likely paying a considerable sum in taxes. However, the Indian Income Tax Act offers various exemptions and deductions to legally reduce your tax liability. This blog will walk you through practical steps to save tax, including investing in government-backed schemes, purchasing a health insurance policy, and using Section 80C to your benefit.
Earning above Rs. 10 lakhs annually places you in the higher income tax brackets. While this signals financial stability, it also means a greater chunk of your income is liable for tax. Fortunately, the Income Tax Act provides multiple avenues to help salaried individuals legally reduce their tax burden.
Let’s explore how to save tax for salary above 10 lakhs
Steps to Save Tax for Salary above 10 Lakhs
Section 80C is one of the most effective tools for tax savings. You can claim up to Rs. 1.5 lakhs annually by investing in:
• Employees’ Provident Fund (EPF)
• Public Provident Fund (PPF)
• Equity Linked Saving Scheme (ELSS)
• Life insurance premiums
• 5-year fixed deposit with banks
• Tuition fees for children
Make sure to utilise the full limit to reduce your taxable income substantially.
You can claim deductions for premiums paid on a health insurance policy under Section 80D:
• Rs. 25,000 for self, spouse, and dependent children
• Additional Rs. 25,000 for parents under 60
• Rs. 50,000 if parents are above 60
If you’ve taken a home loan, you can claim up to Rs. 2 lakhs annually on interest paid under Section 24(b).
Contributions to NPS qualify for an extra deduction of Rs. 50,000 under Section 80CCD(1B), over and above the 80C limit. NPS not only helps save tax but also builds a retirement corpus.
If you live in a rented house, you can claim House Rent Allowance (HRA) exemptions, provided you receive HRA from your employer. Similarly, Leave Travel Allowance (LTA) can be claimed for travel expenses within India, twice in a block of four years.
Interest on education loans taken for higher studies (self, spouse, or children) is deductible under Section 80E for up to 8 years.
Donations to specified funds and charitable institutions are eligible for tax deductions under Section 80G. Ensure you keep receipts and make donations only to approved institutions.
• Food coupons or meal vouchers
• Reimbursement of telephone and internet bills
• Uniform and conveyance allowances
These components can be structured within your salary to reduce taxable income.
Conclusion
Saving tax on a salary above Rs. 10 lakhs is not only possible but also smart financial planning. By leveraging deductions under sections like 80C, 80D, and 24(b), and by choosing suitable investments, you can significantly cut down your tax liability. Simple steps, such as opting for health insurance, investing in NPS, and restructuring your salary, can make a significant difference. And don’t forget the peace of mind that comes with cashless health insurance during medical emergencies.
The above information is for illustrative purposes only. For more details, please refer to the policy wordings and prospectus before concluding the sales.
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