The Income Tax Department in India levies an individual's income based on the tax bracket to which they belong. Taxpayers are constantly seeking methods to pay no income tax. They, however, miss out on pay optimization. If you wish to pay no tax on a salary of more than ten lakh rupees, read this article. Here you will find several tax planning suggestions for salaries exceeding 10 lakhs.

Comparison Between The Income Tax Slab under The Old & New Income Tax Regime

The comparison between the income tax slab under the old income tax regime & the new income tax regime is stated below-

How You Can Save Tax From Salary?

Your pay may contain several tax-free allowances. However, the remainder of your compensation will be taxable income.

Exemptions for Salary (-) = Taxable Salary Income
Deductions minus taxable salary income equals net taxable income.

Exemptions

• If you are a salaried individual, you can claim a standard deduction of Rs. 50,000/- under section 16(ia) of the Income Tax Act.
   
• Individuals can claim an exemption u/s 80C of the IT Act or Income Tax Act by donating to EPF, PPF, ELSS, or NSC or paying LIC premiums for themselves, their spouses, or their children. This provision also exempts the payment of tuition fees for two children. PPF contributions are advantageous on two points. To begin with, the interest on PPF is completely free from Income Tax under Section 10(11) of the Income Tax Act. Second, the funds in the PPF account cannot be attached by anybody or the court.
   
• Section 80CCD (1B) of the IT Act or Income Tax Act allows for an extra Rs 50,000 exemption for contributions to the National Pension System (NPS).
   
• If an individual takes out a house loan and repays interest in excess of Rs 2 lakhs, he can deduct up to Rs. 2 lakhs from his taxable income under Section 24B of the Income Tax Act.
   
• Under Section 80D of the IT Act, an exemption of Rs 25,000 can be obtained for payment of health insurance premiums for self, spouse, and children. An extra exemption of Rs 50,000 can be obtained if an individual pays for his senior citizen parents' health insurance.
   
• Section 80D allows individuals to claim a preventative health check-up deduction of up to Rs 5,000 every fiscal year. This preventive health check-up deduction falls under the previously specified 80D limit of Rs 25,000 for individuals and Rs 50,000 for senior persons.
   
• An additional exemption under Section 80 DDB of the Income Tax Act can be obtained for medical treatment of certain specified conditions for oneself or a dependant. A spouse, parent, or sibling can be a dependant. The exemption is provided for medical costs exceeding Rs. 40,000 per year. However, the exemption for medical costs of a dependant elderly person is Rs. 1,00,000/-. This exemption is in addition to the exemption provided u/s 80D of the IT Act or the Income Tax Act.
   
• Donations to organisations registered u/s 80G of the IT Act or Income Tax Act are eligible for an exemption under Section 80G of the IT Act. Section 80G of the said act provides an income tax deduction to an assessor who makes charitable contributions. This deduction varies according to the receiving organisation, implying that a deduction of 50% or 100% of the amount contributed, with or without restriction, is available.

Deduction Under Section 80C, 80CCC and 80CCD of The Income Tax Act

These three areas allow Indian citizens to save tax. People who have invested their capital in the instruments described in Sections 80C, 80CCC, and 80CCD can claim specific deductions. PPF Accounts, Pension Plans, Life Insurance Policies, and NSC (National Savings Certificate, 5 Years Tax Saving Fixed Deposit, etc.) are some common vehicles in which individuals invest. Citizens can claim a maximum deduction of Rs.1,50,000 under any one of the three areas. Individuals who invest in the National Pension Scheme are eligible for an extra deduction of Rs.50,000 under Section 80CCD.

Medical Expenses

Taxpayers can deduct medical expenses from their taxable income. If consumers produce their medical bills, their medical costs are tax deductible. Employers also give Medical Allowance to all employees. The maximum amount that may be claimed to utilise medical expenses in a given year is Rs.15,000. The Income Tax Act enables deductions under Sections 80D, 80DD, and 80DDB for income spent by taxpayers for health insurance for themselves or their relatives. The amount deducted varies by section and is determined by the type of insurance policy obtained by the taxpayer.

Education Loan

People can avoid taxes by taking out an education loan for themselves, their children, or their spouse. Section 80E of the Income Tax Act permits taxpayers to claim a deduction for the amount paid on loan interest. There is no utmost limit to the number of deductions someone can claim. Individual taxpayers can only seek deductions under Section 80E.

Share and Mutual Funds

People can avoid taxes by investing in stocks and mutual funds. Citizens earning less than Rs.12 lakhs per year are eligible for an extra deduction under Section 80CCG of the Income Tax Act if they invest in certain firms' shares and mutual funds. The deductions are accessible solely to first-time investors under the Rajiv Gandhi Equity Savings Scheme.

Home Loan

Most individuals are recommended to save tax for salary by taking out a house loan since deductions may be claimed under three areas, resulting in significant savings. When consumers take out a house loan, they can deduct the main loan amount under Section 80C of the Income Tax Act. Section 24 permits homeowners to deduct the interest paid on their house loans. In certain situations, a maximum deduction of Rs.2,00,000 is permitted. In others, there is no maximum restriction on the deduction that may be claimed on the amount spent on paying house loan interest.

Long-Term Capital Gains

Long-term capital gains can save taxpayers money on taxes if they receive the gain by selling any long-term capital asset and then investing it in designated instruments. A long-term capital asset is any asset the taxpayer has owned for over three years.

Equity Shares for Sale

To encourage citizens to participate in equity shares and mutual funds, the Indian government has exempted any long-term gains from the sale of equity shares from taxation. However, the tax is only waived if the shares are held for more than a year.

House Rent Allowances

Employees in India are entitled to House Rent Allowance (HRA), which is deducted from their pay. HRA allows consumers to save money on taxes because it may be claimed under the deductions section. Individuals who pay more than Rs.1 lakh in rent in a year must produce documentation such as their PAN card, lease agreement, and so on.  

Donations

Citizens of India can save money on taxes by claiming deductions for donations made to social or charitable causes or contributions made to the National Relief Fund. Section 80G of the IT Act allows them to claim such deductions. The Ministry of Finance lists the organisations to which taxpayers can give and whether or not deductions are authorised depending on the reason for which the money was donated. People cannot claim tax deductions for in-kind contributions. Taxpayers can claim deductions of up to Rs.10,000 for cash donations; for amounts more than Rs.10,000, they must give using checks.

LTA (Leave Travel Allowance)

If taxpayers get LTA from their employers, they are eligible for tax-free LTA. It can be claimed twice in a four-year period. To be eligible, they must travel within India throughout their leave term.

These are some of the common ways to save tax for salary. Taxpayers who carefully arrange their income, assets, spending, and taxes may save a significant amount of money. It is not recommended to utilise unlawful methods to save taxes.

Endnote

According to the new tax system, if your yearly income runs between Rs.10.00 lakhs and Rs.12.50 lakhs, your tax deduction rate will be Rs.75,000 + 20% over Rs.10.00 lakhs. As a result, the new regime's tax will be Rs. 95,000 plus cess.

These are some of the most prevalent methods to save tax for salaries over Rs 10 lakh. However, it is always advisable to seek the advice of a tax professional to maximise your deductions.With Online Legal India, you can file your income tax return anywhere, at any time.