How To Save Tax On Income Above Rs 10 Lakh

 Significant tax savings can be made, provided that you choose the right options in a timely manner

Most people treat income tax as a burden, as it creates the perception of one's hard-earned money being taken away. However, tax is necessary for the nation's development, protection and welfare programs. Most people who fear taxes are usually not aware of the legal options to save tax. That is why awareness is necessary.

As of now, a significant percentage of taxpayers have income higher than Rs 10 lakh. Let us take a look at how to save tax on income above Rs 10 lakh.

Old vs. New Tax Regime

First, we need to understand the basic difference between the old and the new tax regime. An individual taxpayer can choose the old or the new tax regime. Under the old tax regime, there is no tax on income up to Rs 2.50 lakh. In the new tax regime, that limit is higher at Rs 3 lakh. A tax of 5% is applicable on income in the range of Rs 2.5 lakh to Rs 5 lakh under the old tax regime. In the new tax regime, the range is Rs 3 lakh to Rs 6 lakh.

For income of Rs 5 lakh to Rs 10 lakh, income tax rate is 20% as per the old tax regime. In comparison the rate is just 10% on income of Rs 6 lakh to Rs 10 lakh in the new tax regime. For income above Rs 10 lakh, a flat rate of 30% is applicable under the old tax regime. In the new tax regime, tax rate is 15% for income of Rs 9 lakh to Rs 12 lakh; 20% for Rs 12 lakh to Rs 15 lakh; and 30% for income of Rs 15 lakh and above.

Although tax rates are lower in the new tax regime, the deductions and exemptions are relatively less. The old tax regime has a greater number of tax saving options. So, when it comes to choosing between the old and the new tax regime, you need to look at the deductions and exemptions you are eligible for. You can get to know that from the salary structure mentioned in your CTC.

Tax saving options on income of more than Rs 10 lakh - New Tax regime

• A number of deductions and exemptions can be claimed under the new tax regime. Below are some of the tax saving options you can consider.
• Standard deduction - Salaried individuals can get standard deduction of Rs 50,000.
• Section 80CCD(2) - This is for the employer contribution to NPS.
• Section 80CCH - This is meant for any investment made in Agniveer Corpus.
• Section 57(iia) - This deduction is provided for any family pension received.
• Section 10(10C) is for exemption on voluntary retirement; Section 10(10) for gratuity payment and Section 10(10AA) for leave encashment.
• Section 24 - This is for interest on home loan paid on a let-out property.
• Transport allowance - This can be claimed if the taxpayer is a specially-abled person.
• Conveyance allowance - This is applicable when the conveyance expenditure is treated as part of the job.
• Cost of travel - This can be deducted when compensation is provided for travel expenses, related to tour or transfer.

Tax saving options on income of more than Rs 10 lakh - Old Tax regime

When choosing the old tax regime, you can get various deductions and exemptions. It includes Section 80D that covers health insurance. Section 80E covers deduction for interest paid on loan taken for higher education. Section 80G is applicable for any donations or charity made to a notified institution.

The most popular tax saving options come under Section 80C. It includes Employees’ Provident Fund (EPF), Equity Linked Saving Scheme funds (ELSS), Public Provident Fund (PPF), Sukanya Samriddhi Yojana (SSY), Home loan repayment and Stamp duty, Fixed Deposit for 5 years and National Savings Certificate. Other tax saving options include Section 80DD (cost of treatment of disabled dependents), home loan repayment and life insurance maturity amount.

If you are eligible for various deductions and exemptions, you should go with the old tax regime. If not, then the new tax regime will be beneficial. If you fully utilize the tax saving deductions and exemptions under the old tax regime, you can achieve zero tax on income of around Rs 10 lakh. To know which tax regime is best for you, please use the following link to compare the taxes as per the old vs the new tax regime - https://incometaxindia.gov.in/Pages/tools/old-regime-vis-a-vis-new-regime.aspx.