Finance Minister Nirmala Sitharaman announced the new tax regime in Budget 2020, allowing taxpayers to choose between it and the existing tax structure when filing their taxes. Although your income will be taxed at lower rates dependingnew tax plate, there is a catch. You will no longer be able to use deductions under the Income Tax Act to further reduce your tax liability.
According to government estimates, 5.3 crore out of a total of 5.78 crore claim tax exemptions amounting to less than 2 lakh rupees. The most popular include investments in the Public Provident Fund,life insurance schemes, tax-saving fixed deposits etc., most of which fall within the maximum limit of Rs 1.5 lakh provided in section 80C.
How to save tax on income above Rs. 15 lakhs?
An additional tax benefit is available for contributions up to Rs 50,000 toThe public pension schemeas per the provisions of 80CCD(1B), bringing the total amount to Rs 2 lakh. But if you are in the highest tax bracket and expect to save tax on income above Rs.15 lakhs while preparing to file your tax return for the tax year 2019-20, here are some things to keep in mind. :
1. If you do not invest in tax saving instruments
In his budget speech, the finance minister explicitly stated that a person with an annual income of Rs 15 lakhs, who does not get any deduction under the proposed tax structure, will have to pay only Rs 1.95 lakhs in tax instead of Rs 2.73 lakhs in the old . regime. To achieve this, you have to forgo the tax benefits specified in Chapter VI A of the Income Tax Rules as well as the standard deduction of Rs 50,000 for the tax year 2019-20. The new tax rules allow more tax savings for income above Rs 15 lakhs in this case, as illustrated below.
| Old tax structure | Calculation of taxes | New tax structure | Calculation of taxes |
| 5 % | 12.500 | 5 % + 10 % | 12.500 + 25.000 |
| 20 % | 10.000 | 15 % + 20 % | 37.500 + 50.000 |
| 30 % | 15,00,00 | 25 % +30 % | 62.500 + 0 |
| total (1+2+3) | 2.625,00 | total (1+2+3) | 187500 |
| cease (4%) | 10.500 | cease (4%) | 7500 |
| Income tax | 273000 | Income tax | 195000 |
2. If you invest up to 1.5 lakh
If you have invested in the public welfare fund,Employee benefit fund, Sukanya Samriddhi scheme, life insurance or health insurance premium, fixed bank or post office tax savings or any other provision that allows tax exemption of an amount of Rs 1.5 lakh can still lose Rs 31,200 in tax savings for income above 15 lakhs by following the old school tax payment method. The new tax regime would work in your favor even in this case. It allows you to claim tax relief on income from life and agricultural insurance, income from the voluntary pension scheme, rent paid, recovery of your pension permits and compensation for reduction of company staff.
3. If you avail deductions worth 2.5 lakh or more
If your annual income is between 15 to 20 lakhs and you claim 2.5 lakhs in tax credit, you have the option of choosing one of the two schemes as the tax payable will be roughly the same. But if you are targeting tax savings for income above 15 lakhs and the amount of tax exemption you are seeking is more than 2.5 lakhs, it is wise to stick to the old method ofCalculation of taxes. Let us understand this by looking at the tax calculation by both methods for a person earning an annual salary of Rs 20 lakhs.
Tax calculation for annual income of 20 lakhs - old regime vs new regime
| details | Tax calculation (old) | Tax calculation (new) |
| wages collected | 20.000.000 | 20.000.000 |
| standard deduction | 50.000 | NUL |
| Salary | 19.50000 | 20.000.000 |
| Chapter VI A Exceptions | 150.000 | Nul |
| Taxable income | 17.50000 | 20.000.000 |
| Income tax | 3, 37, 500 | 3.37.500 |
| 4% fee | 13.500 | 13.500 |
| tax to pay | 3.51.000 | 3.51.000 |
How to save tax on salary above Rs 10 lakhs?
As your income increases, so do your tax obligations. Fortunately, India's income tax laws allow for several ways to reduce your tax liability. One of the most effective and beneficial ways to save your tax is throughinvestments to save tax.
So how do you save tax on salary above Rs 10 lakh? Here is a list of investments that will help yousave taxwhile building a stronger future for your family:
1. Reduce your taxable income by up to Rs 1.5 lakhs (Section 80C, 80CCC, 80CCD)
a) Financial protection investments
- time-limited insurance schemes
- life insurance schemes
b) Invest for long-term goals and retirement
- Unit-linked insurance schemes(ULIP)
- Pension schemes or annuities from life insurance companies
- Public Provident Fund (PPF) og Employee Provident Fund (EPF)
- New level I account for the pension scheme
- Savings plan for seniors
- Purchase of house property - Land registration and amortization of mortgage loans
c) Invest for your child's future
- Sukanya Samriddhi Yojana (SSY)
- Plans for children from life insurance companies
d) Protect your assets against inflation and market trends
- 5-year tax savings time deposit
- Grant and cash back plans
- National Savings Certificate (NSC)
2. Additional reduction up to Rs 50,000 for NPS investors (Section 80CCD
a) The maximum deduction available in the deductible for the NPS Tier-1 account is limited to:
- 10% of the annual income for salaried investors
- 20% of the annual income for autonomous investors
b) You can contribute an additional amount for a deduction of up to Rs 50,000 per year
3. Reduce your taxable income by up to Rs 75,000 (Section 80D)
in)health insurancefor you and your family
- Reduces your taxable income by up to Rs 25,000 if you are below 60 years
- Includes expenses for preventive health check up to Rs.5000
- Cover your children under 25 under the same plan
b) Health insurance for your parents
- Reduce your taxable income by up to Rs 50,000 more if parents are 60 and above (Rs 25,000 for under 60s)
- You can also claim medical expenses for elderly parents
- Include expenses for preventive health check up to Rs.5000
4. Reduce your taxable income by up to 2 lakhs (Section 24)
a) If you have bought or built a home using a mortgage loan, principal and interest payments on the loan provide a tax deduction
b) Interest payments up to Rs 2 lakhs deductible under Section 24B
c) Repayment of the principal can be claimed underSection 80C
Also read about -Deduction according to section 80CCC
Two frequently asked questions to save tax on salaries above 15 lakhs in India
1. How can I save tax if I earn 15 lakh?
From the table above, you can easily see that you can claim various deductions from your earned income. Now you can save tax if you earn a salary of Rs 15 lakhs, here is a table that shows you how to save tax for salary above 15 lakhs:
| Deductions for claims | Available deduction ($) |
| standard deduction | 50.000 |
| Investments u/s 80 C | 150.000 |
| Health insurance premium u/s 80 D | 25.000 |
| Additional deductions in NPS* | 50.000 |
| Interest on mortgage loans | 200.000 |
| Total | 475.000 |
From above you can see that if your income is Rs 15 LPA you can claim various deductions in the taxable income up to4.85 lakh rupees.
Use: You will only be able to benefit from the deductions and exemptions if you choose the old tax system. These deductions and exemptions are not available in the new tax system.
2. How much tax do I have to pay on 15 lakhs?
Here is the table showing how much tax you will have to pay on income of Rs 15 lakhs if you opt for the old and new tax schemes:
Use:Deductions and exemptions are not available in the new tax system.
| Category | Old tax regime (₹) | New Tax Regime (₹) |
| Income | 15.00.000 | 15.00.000 |
| deduction | 4.85.000 | 0 |
| Taxable income | 10,15.000 | 15.00.000 |
| Income tax | 117.000 | 188.000 |
| Add: Cess | 4680 | 7500 |
| Net tax liability | 121.680 | 195.500 |
The best way to save tax on salary above Rs 15 lakhs is to opt for the old tax scheme and claim all available deductions and exemptions on tax saving investments.
Alternatively, you can follow the new tax system to submit your tax return. However, once elected, you cannot claim losses or accumulated deductions on investments to save tax.
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FAQs
How to save tax on salary above 15 lakhs in India? ›
As individual claiming section 80C deduction can save tax of Rs 46,800 (including cess). To claim section 80C deduction, one must invest in any of the specified instruments such as Employees' Provident Fund (EPF), Public Provident Fund (PPF), tax-saving fixed deposit, ELSS mutual funds etc.
How can I reduce my high salary tax in India? ›- Invest in products applicable under section 80C. ...
- Invest in Health Insurance. ...
- Claim deduction on your House Rent Allowance. ...
- Claim deduction on your home loan interest. ...
- Do not empty your savings account. ...
- Contribute to charity.
- Fully Fund Tax-Advantaged Accounts. ...
- Consider a Roth Conversion. ...
- Add Money to a 529 Account. ...
- Donate More to Charity. ...
- Review and Adjust Your Asset Allocation. ...
- Consider Alternative Investments. ...
- Maximize Other Deductions.
- A Standard deduction of Rs.50,000.
- Public Provident Fund.
- Equity Linked Saving Scheme.
- Life and Health Insurance Premium.
- Children Tuition Fees.
As individual claiming section 80C deduction can save tax of Rs 46,800 (including cess). To claim section 80C deduction, one must invest in any of the specified instruments such as Employees' Provident Fund (EPF), Public Provident Fund (PPF), tax-saving fixed deposit, ELSS mutual funds etc.
How can I legally reduce my income tax? ›- An effective way to reduce taxable income is to contribute to a retirement account through an employer-sponsored plan or an individual retirement account.
- Both health spending accounts and flexible spending accounts help reduce taxable income during the years in which contributions are made.
50 % of basic salary plus dearness allowance if staying in metro cities (Mumbai, Kolkata, Delhi or Chennai) or 40 % of basic salary plus dearness allowance if staying in non-metro cities.
How can I save 100% tax in India? ›- Public Provident Fund.
- National Pension Scheme.
- Premium Paid for Life Insurance policy.
- National Savings Certificate.
- Equity Linked Savings Scheme.
- Home loan's principal amount.
- Fixed deposit for five years.
- Sukanya Samariddhi account.
For India, the entry point is $1,75,000 or Rs 1.45 crore. In Asia, Singapore has the highest threshold with $3.5 million required to be in the top 1%, ahead of Hong Kong's $3.4 million. For the Middle East, the highest entry point is at UAE, estimated at $1.6 million.
How many people pay 1 crore tax in India? ›Income tax data shows that only 131,000 Indians earned above ₹1 crore annually in FY21, roughly 0.01% of the country's population.
How can I lower my taxable income 2023? ›
- Contribute to a 401(k) or Traditional IRA.
- Enroll in Your Employee Stock Purchasing Program.
- Deduct Business Expenses.
- If You Can, Invest in Qualified Opportunity Funds.
- Donate Stocks Through Donor-Advised Funds.
- Sell Poor-Performing Stocks.
- Deduct Student Loan Interest.
What is the maximum tax saving in India? Under Section 80C of the Income Tax Act, an individual can claim maximum tax savings of Rs 1.5 lakhs per financial year through deductions.
What is the maximum tax benefit in India? ›It allows a maximum deduction of Rs 1.5 lakh every year from the taxpayer's total income. The benefit of this deduction can be availed by Individuals and HUFs. Companies, partnership firms, and LLPs cannot avail the benefit of this deduction. Section 80C includes subsections, 80CCC, 80CCD (1), 80CCD (1b) and 80CCD (2).
What is considered a high earner? ›Based on that figure, an annual income of $500,000 or more would make you rich. The Economic Policy Institute uses a different baseline to determine who constitutes the top 1% and the top 5%. For 2021, you're in the top 1% if you earn $819,324 or more each year. The top 5% of income earners make $335,891 per year.
Where do high income earners put their money? ›Where do millionaires keep their money? High-net-worth individuals put money into different classifications of financial and real assets, including stocks, mutual funds, retirement accounts and real estate. There were 24.5 million millionaires in the U.S. in 2022. And only 21% of them inherited money.
Does contributing to 401k reduce taxable income? ›Money pulled from your take-home pay and put into a 401(k) lowers your taxable income so you pay less income tax now. For example, let's assume your salary is $35,000 and your tax bracket is 25%. When you contribute 6% of your salary into a tax-deferred 401(k)— $2,100—your taxable income is reduced to $32,900.
What is the tax rate for 40 lakh salary in India? ›If you make ₹ 4,000,000 a year living in India, you will be taxed ₹ 1,533,000. That means that your net pay will be ₹ 2,467,000 per year, or ₹ 205,583 per month. Your average tax rate is 38.3% and your marginal tax rate is 43.2%.
How to save tax in India for salaried quora? ›- First compute your income from all sources including salary, interest, bonus etc.
- Claim standard Deduction of Rs 50000.00.
- Then claim deductions under section 80C upto a maximum of Rs 150000.00. ...
- Next, invest Rs 50,000 under section 80CCD (1B) in the National Pension Scheme and claim deduction.
- Buy a home loan and enjoy tax benefits under Section 80C.
- Buy a health insurance policy.
- Park your money in government schemes.
- Buy life insurance plans.
- Investment options under Section 80C.
- Other Tax Saving options beyond Section 80C.
- Equity Linked Savings Scheme (ELSS)
- Public Provident Funds (PPF)
- Senior Citizen Savings Scheme (SCSS)
- Sukanya Samriddhi Yojna (SSY)
- Tax Saver Fixed Deposit (FD)
- National Pension Scheme (NPS)
- National Savings Certificates (NSC)
- Unit Linked Insurance Plans (ULIP)
What is rich class salary in India? ›
According to the World Inequality Database, an annual income of Rs 18.6 lakh or more in 2021 would put an Indian among the richest 1 percent of the country.
What is the middle class income in India? ›In India, the middle-income group is defined as households with an annual income between INR 7.5 lakh and INR 15 lakh. According to a recent report by the National Statistical Office (NSO), the per capita income in India in 2020-21 was INR 1,27,768.
How much net worth is rich in India? ›How much money is needed to be in the top 1% rich list in India? For India, the entry point is $1,75,000 or Rs 1.45 crore.
Can you retire with 10 crore in India? ›If you have 10Cr INR today, it will take you roughly 28 years to spend it. (Assuming a spending rate of INR 10,000 per day) The interesting part is: - Most self made 10Cr folks don't want to retire. - And, most folks obsessed with early retirement don't make 10Cr. Very solid second point I see many who retired in 30s.
Who paid most tax in India? ›Akshay Kumar was the highest taxpayer in India for 2022. According to the Income Tax department, he paid an income tax of Rs.29.5 crore, the highest among individuals in India last year.
Which state pays highest tax in India? ›Description -This infographic shows the states with highest tax revenue in India. Uttar Pradesh ranked top in tax revenue during the year 2020-21.
How to get the biggest tax refund in 2023? ›- Try itemizing your deductions.
- Double check your filing status.
- Make a retirement contribution.
- Claim tax credits.
- Contribute to your health savings account.
- Work with a tax professional.
- Keep the W-2 form handy. ...
- Make investments. ...
- Claim spousal exemption. ...
- Pay tax on your worldwide income. ...
- Declare all your financial interest. ...
- Declare your dependents. ...
- Claim your Medicare for the period you were on OPT. ...
- Claim deductions for moving expenses.
Standard deduction increase: The standard deduction for 2023 (which'll be useful when you file in 2024) increases to $13,850 for single filers and $27,700 for married couples filing jointly. Tax brackets increase: The income tax brackets will also increase in 2023.
How can I get maximum tax exemption in India? ›- Buy a Health Insurance Policy. ...
- Tax Saving Investments and Government Schemes. ...
- Opt for Life Insurance Plans. ...
- Exemptions on Rented Premises. ...
- Donate to Charity. ...
- Support a Political Party.
Is 1 lakh a good salary in India? ›
eLearning Solutions - Blog - Is 1 Lakh salary a good in India? All collectively concurred that The 1 Lakh salary looks great on paper, however, it goes up solely after considering a lease, bills, food, compensations of homegrown workers, and way of life costs, particularly while residing in the metro.
Is 2 lakh a good salary in India? ›The definition of middle class income in India can vary depending on the source and methodology used. However, a commonly used criterion is based on the income level. According to the Reserve Bank of India (RBI), households with an annual income of Rs. 2.5-10 lakhs fall under the middle-income group.
Who pays highest income tax in India? ›Akshay Kumar was the highest taxpayer in India for 2022. According to the Income Tax department, he paid an income tax of Rs. 29.5 crore, the highest among individuals in India last year.
What is the tax for 30 lakhs in India? ›| Gross salary | Tax payable as per the old regime | Tax payable in revised new regime (2023) |
|---|---|---|
| 20,00,000 | 3,66,600 | 2,96,400 |
| 30,00,000 | 6,78,600 | 6,08,400 |
| 50,00,000 | 13,02,600 | 12,32,400 |
| 1,00,00,000 | 31,48,860 | 30,71,640 |
If you make ₹ 90,000 a year living in India, you will be taxed ₹ 10,800. That means that your net pay will be ₹ 79,200 per year, or ₹ 6,600 per month. Your average tax rate is 12.0% and your marginal tax rate is 12.0%. This marginal tax rate means that your immediate additional income will be taxed at this rate.
What is income tax for 50 lakhs in India? ›| Gross Salary | 50,00,000 |
|---|---|
| 80D | (50,000) |
| 80E | (25,000) |
| Net Taxable Income | 42,47,600 |
| Tax on the above income | 10,86,780 |
Income tax data shows that only 131,000 Indians earned above ₹1 crore annually in FY21, roughly 0.01% of the country's population. A 2020 Bloomberg report said India's top-paid 1% earn ₹55 lakh and above. To be sure, many businesses and self-employed individuals under-report incomes to avoid higher taxes.
What is the top 1% salaries in India? ›India | Rs 16 Lakhs
It's fairly easy to be in the top 1 per cent in India – You would need to earn just around $77,000 or Rs 16,13,073 annually.
For India, the entry point is $1,75,000 or Rs 1.45 crore. In Asia, Singapore has the highest threshold with $3.5 million required to be in the top 1%, ahead of Hong Kong's $3.4 million. For the Middle East, the highest entry point is at UAE, estimated at $1.6 million.
What is handsome salary in India? ›Rs 15 lakh to Rs 30 lakh per year (Rs 1.25 lakh to Rs 2.5 lakh per month) Men having an annual salary income of between Rs 15 lakh to Rs 30 lakh are 130% more desired for marriage than other men.
How much salary is 30 lakh in usa? ›
So, for 30 LPA in India, the equivalent salaries are: 165K USD in USA.
What is a good salary in India in USD? ›A.
India's median salary is 27,200 INR per month (330 USD).
Top Corporate Tax Payers In India
In 2022, Tata Consultancy Services (TCS) paid more tax than any other Indian company, followed by Reliance Industries and the software giant Infosys, Mint reported over the weekend.
According to data with the income tax department, Gurgaon is the ninth largest contributor of income tax among Indian cities. At the top is financial capital Mumbai, which is followed by Delhi, Bengaluru, Chennai, Kolkata, Hyderabad, Ahmedabad and Pune.
How many people pay 30% tax in India? ›48.4 lakh individual taxpayers in top-most 30% slab in India | Business News,The Indian Express.