This article provides 10 tips to help Indian taxpayers earning a salary above ₹30 lakhs save tax, including investing in tax-saving instruments and hiring a tax consultant.
As an Indian taxpayer earning a salary above ₹30 lakhs, finding ways to save tax and maximise your take-home income is crucial. While paying taxes is a civic duty, smart tax planning can help you save significant money to achieve your financial goals. This article will explore some tips and strategies on how to save tax on salary above ₹30 lakhs.
Tips to Save Tax on Salary Above ₹30 Lakhs
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Invest in Tax-Saving Instruments
One of the most effective ways to save tax on salary is by investing in tax-saving instruments. Under Section 80C of the Income Tax Act, you can claim a deduction of up to ₹1.5 lakhs by investing in various tax-saving instruments such as Public Provident Fund (PPF), National Savings Certificate (NSC), Equity Linked Savings Scheme (ELSS), and more. These investments help you save tax and provide good returns over the long term.
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Utilise Deductions Under Section 80D
Apart from Section 80C, Section 80D of the Income Tax Act also offers deductions for medical expenses. You can claim a deduction of up to ₹25,000 for health insurance premiums paid for yourself, your spouse, and your dependent children.
Additionally, if you are paying for the health insurance of your parents, senior citizens, you can claim a deduction of up to ₹50,000. This can be a substantial saving for those with high medical expenses.
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Claim Deductions for Home Loans
If you have taken a home loan, you can claim deductions on the principal and interest components of the loan under Section 80C and Section 24, respectively. You can claim a deduction of up to ₹2 lakhs on the interest paid on the home loan if the property is self-occupied, and there is no limit on the principal repayment amount. This can be a significant saving for those recently taking a home loan.
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Utilise Deductions Under Section 80TTA and Section 80TTB
Under Section 80TTA, individuals can claim a deduction of up to ₹10,000 on the interest earned from savings bank accounts. However, the deduction limit for senior citizens is increased to 50,000 under Section 80TTB. This is particularly useful for those who have a significant amount of savings in their bank accounts.
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Claim Deductions for Donations
Donations made to registered charitable institutions can also help you save tax on salary. Under Section 80G of the Income Tax Act, you can claim a deduction of up to 50% of the donation amount. The entire donation amount can be deducted if you donate to specific funds such as the National Relief Fund or the Prime Minister’s National Relief Fund.
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Invest in the National Pension System (NPS)
The National Pension System (NPS) is a government-sponsored pension scheme offering individuals tax benefits. Under Section 80CCD of the Income Tax Act, individuals can claim a deduction of up to ₹1.5 lakhs by investing in the NPS.
Additionally, under Section 80CCD(1B), investing in the NPS can claim an additional deduction of up to ₹50,000. This can be a significant saving for those who want to build a retirement corpus.
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Consider Investing in Rental Properties
Investing in rental properties can also help you save on tax. Under Section 24 of the Income Tax Act, you can claim a deduction of up to ₹2 lakhs on the interest paid on loan taken for the purchase, construction, or renovation of a rental property. Additionally, you can claim a deduction for property taxes, maintenance expenses, and depreciation on the property. This can be a substantial saving for those who have rental properties.
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Opt for the New Tax Regime
The Indian government introduced a new tax regime in the Budget 2020, which offers lower tax rates but eliminates most deductions and exemptions. Individuals can choose between the old and new tax regimes based on their preferences.
For those with a salary above ₹30 lakhs, it is advisable to evaluate both regimes and choose the one that offers maximum save tax on salary.
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Plan Your Investments Strategically
It is essential to plan your investments strategically to maximise tax savings. For instance, if you have exhausted your Section 80C limit, consider investing in other tax-saving instruments such as National Pension System (NPS), health insurance policies, or donations.
Additionally, if you have long-term financial goals, consider investing in equity-oriented investments such as mutual funds, which offer tax benefits and higher returns over the long-term.
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Hire a Professional Tax Consultant
Finally, hiring a professional tax consultant to help you with tax planning is advisable. A tax consultant can help you navigate complex tax laws, evaluate various save tax on salary instruments, and create a customised tax-saving strategy based on your financial goals and risk appetite.
While hiring a tax consultant may incur some cost, it can help you save tax on salary significant money in the long term.
Conclusion
Saving tax is an essential part of financial planning, and there are several ways to save tax on a salary above ₹30 lakhs. By investing in tax-saving instruments, utilising deductions, planning investments strategically, and hiring a professional tax consultant, individuals can maximise their take-home income and achieve their financial goals. However, it is essential to evaluate all options carefully and choose the ones that align with your financial goals and risk appetite.
Vakilsearch, a legal services provider in India, can help individuals plan and file their tax returns. Our team of experts can assist in evaluating various tax-saving options and creating a customised tax-saving strategy based on an individual’s financial goals and risk appetite. We can also help individuals file income tax returns accurately and on time, ensuring compliance with the tax laws. By partnering with Vakilsearch, individuals can save tax on salary time and money and achieve their financial goals more effectively.
