Grow Wise

For individuals earning a salary above 10 lakhs in India, tax planning becomes crucial to minimize tax liabilities and maximize take-home pay. By leveraging various tax-saving strategies and investment avenues, taxpayers can optimize their finances and ensure compliance with the Indian tax laws. In this comprehensive guide, we’ll explore effective ways to save tax for individuals with salaries above 10 lakhs, covering key deductions, exemptions, and investment options available under the Indian Income Tax Act.

Understanding Taxation for Salary Above 10 Lakhs: In India, individuals earning a salary above 10 lakhs fall under the higher tax brackets, subject to higher income tax rates. As per the current tax slabs for the financial year 2023-24, individuals with annual income exceeding 10 lakhs are taxed at the following rates:

• 10% for income between 10 lakhs and 12.5 lakhs
• 20% for income between 12.5 lakhs and 15 lakhs
• 30% for income above 15 lakhs

To minimize tax liabilities and optimize take-home pay, taxpayers can utilize various tax-saving instruments and investment options provided by the Income Tax Act.

Tax-Saving Strategies for Salary Above 10 Lakhs:

1. Investment in Provident Fund (PF) and Public Provident Fund (PPF): Contributing to Employee Provident Fund (EPF) through salary deductions or investing in Public Provident Fund (PPF) allows taxpayers to claim deductions under Section 80C of the Income Tax Act. Contributions to EPF are eligible for deductions up to 12% of the employee’s basic salary, while investments in PPF can earn deductions of up to 1.5 lakhs annually.
2. Equity-Linked Savings Scheme (ELSS): ELSS mutual funds offer investors the dual benefit of tax savings and potential capital appreciation. Investments in ELSS funds qualify for deductions under Section 80C, with a maximum limit of 1.5 lakhs per financial year. ELSS funds have a lock-in period of three years, providing tax benefits while fostering long-term wealth creation through equity investments.
3. National Pension System (NPS): The National Pension System (NPS) allows taxpayers to save for retirement while availing tax benefits under Section 80CCD(1) and Section 80CCD(2) of the Income Tax Act. Contributions made to NPS by both employees and employers are eligible for deductions up to 10% of the salary (basic plus dearness allowance) under Section 80CCD(1), subject to a maximum of 1.5 lakhs. Additional deductions of up to 10% of gross total income are available for contributions made by the employer under Section 80CCD(2).
4. Health Insurance Premiums: Investing in health insurance policies for self, spouse, children, or parents allows taxpayers to claim deductions under Section 80D of the Income Tax Act. Premiums paid towards health insurance policies qualify for deductions of up to 25,000 for self, spouse, and dependent children, with an additional deduction of up to 25,000 for premiums paid towards parents’ health insurance. An additional deduction of up to 5,000 is available for preventive health check-ups.
5. Home Loan Interest Payment: Taxpayers availing home loans can claim deductions on the interest paid towards the loan under Section 24(b) of the Income Tax Act. Individuals can claim deductions of up to 2 lakhs annually for interest payments on home loans for a self-occupied property. Additionally, deductions for principal repayment of home loans are available under Section 80C.

Conclusion: For individuals earning a salary above 10 lakhs in India, tax planning is essential to optimize tax savings and maximize take-home pay. By leveraging tax-saving instruments such as EPF, PPF, ELSS, NPS, health insurance, and home loan interest payments, taxpayers can reduce their tax liabilities while securing their financial future. It’s advisable to consult with a financial advisor or tax consultant to develop a personalized tax-saving strategy tailored to individual financial goals and circumstances. With careful planning and prudent investment decisions, taxpayers can achieve significant tax savings while ensuring compliance with Indian tax laws.

Please note:

• GrowWiseis not registered with the Securities and Exchange Board of India (SEBI) as an investment advisor, research analyst, or portfolio manager.
• The information published on this blog is presented for educational purposes only and should not be construed as financial advice.
• We strongly recommend that you seek the advice of a qualified financial advisor before making any investment decisions.