For saving tax on a salary of 50 lakhs and above, individuals often seek strategies to optimise their tax liabilities while maximising their take-home pay. With a higher income bracket comes the potential for increased tax obligations, prompting individuals to explore various avenues for tax-saving instruments.
This guide delves into practical methods and considerations for individuals earning 50 lakhs or more on how to save tax on salary to manage their tax liabilities and preserve their financial resources effectively.
Assuming there is no other income an employee has earned, below is the calculation of tax on a resident individual’s minimum salary without any deduction for Assessment Year 2024-2025.
| Gross Income: | ₹50,00,000 |
|---|---|
| Standard Deduction: | ₹50,000 |
| Net Income: | ₹49,50,000 |
| Net Income: | ₹49,50,000 |
| Tax liability | |
| As per Old Regime: ₹12,48,000 | |
| As per the New Regime, ₹12,32,400 |
| Deductions | Criteria | Deduction Limit |
|---|---|---|
| Tax Saving Investments | ||
| Section 80C | Investments in ELSS, PPF, SSY, NSC, and Life Insurance Premiums, etc. | ₹1.5 lakh |
| Section 80CCC | Contributions towards annuity plans for pension, offered by LIC or other insurers, within Section 10 (23AAB). | ₹1.5 lakh |
| Section 80CCD(1) | Contributions towards Government schemes such as APY, NPS, etc. | 20% of Gross Income for Self-Employed; 10% of Salary + DA for Employed (within the ₹1.5 lakh limit under Section 80C) |
| Section 80CCD(2) | Employer's contribution to an employee's National Pension Scheme account. | 10% of the employee's salary |
| Section 80CCD(1B) | Additional contributions to the National Pension Scheme account. | ₹50,000 |
| Section 80CCG | Investment in equity shares under the Rajiv Gandhi Equity Scheme. | ₹25,000 or 50% of the investment in equity shares, whichever is less |
| Other Deductions | ||
| Home Loan Payments | Payment of Principal and interest of Loan for new home | Principal - ₹1,50,000 Interest - ₹2,00,000 |
| Life Insurance Maturity Amount | Policies issued before 1 April | 20% |
| Policies issued after 1 April 2012 | 10% | |
| Policies issued after 1 April 2013 for individuals with disability or disease | 15% | |
| Health/ Medical Insurance Premium (Section 80D) | Health/ Medical Insurance payment for parents, Self, Spouse, and Dependent Children | ₹25,000 - Age Below 60 ₹50,000 - Age Above 60 |
| Cost for Disabled Dependents (Section 80DD) | Physical Disability in the Financial Year | 40% disability: ₹75,000 80% disability: ₹1,25,000 |
| Interest on Education Loan (Section 80E) | Interest till 8-year period for Higher Education Loan Repayment | Unlimited amount |
| Donation to Qualified Institutes/ Charity (Section 80G) | Donations to charitable organisations and other income tax-qualified institutes | 50% or 100% as prescribed |
Note that the above deduction can be claimed on the lower of expenses made or the maximum limit allowed.
Partly Exempt Allowances:
| Allowance Types | Limit |
|---|---|
| HRA benefits | Lower of
|
| Leave Travel Allowance (LTA) | Actual cost of LTA |
| Conveyance Allowances | ₹1600/ Month |
| Medical Bills Reimbursement | ₹15,000/ Year |
| Education Allowances | ₹ 100 per month up to a maximum of 2 children |
| Hostel Allowances | ₹300 per month up to a maximum of 2 children |
Fully Exempt Allowances:
No, tax deductions can only be claimed for investments made in the old tax regime under Section 80C, 80CCC, and 80CCD.
The above deductions and exempt allowances benefits can be used to save taxes above ₹ 10 lakhs.
Disclaimer:
The aforesaid article presents the view of an independent writer who is an expert on financial and insurance matters. PNB MetLife India Insurance Co. Ltd. doesn’t influence or support views of the writer of the article in any way. The article is informative in nature and PNB MetLife and/ or the writer of the article shall not be responsible for any direct/ indirect loss or liability or medical complications incurred by the reader for taking any decisions based on the contents and information given in article. Please consult your financial advisor/ insurance advisor/ health advisor before making any decision.
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Goods and Services Tax (GST) shall be levied as per prevailing tax laws which are subject to change from time to time.
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