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Smart Tax-Saving Techniques for a Salary of Rs. 10 Lakhs
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:
- Actual HRA received
- Actual rent paid minus 10% of salary
- 50% of your basic salary if you live in a metro city.
- 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. Additionally, having clarity on Assessment Year vs Financial Year ensures that you file your returns correctly and avoid unnecessary penalties.
Related Articles:
- How to save your money?
- Financial Planning : Why do I Need Saving & Investment Plan
- How to manage risk in your investment portfolio?
- How do I secure my family's future?
- Best Tax-Saving Investments under Section 80C
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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.
Written By:
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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