Our article provides 10 tips and strategies for salaried individuals in India earning above ₹10 lakhs per annum to save tax and optimise their income for a secure financial future.
Income tax is a crucial component of our financial lives, and as salaried individuals earning more than ₹10 lakhs per annum, it is crucial to know how we can save tax. The Income Tax Act of India provides several tax-saving options that can be availed of by individuals with a salary above ₹10 lakhs. This article will discuss how you can save tax for salary above 10 lakhs and optimise your income.
Top Ways to Save Tax for Salary Above 10 lakhs and Optimise Your Income
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Invest in Mutual Funds To Save Tax
Save tax for salary above 10 lakhs mutual funds, also known as Equity-Linked Saving Schemes (ELSS), are a popular investment option to save tax under Section 80C of the Income Tax Act. These mutual funds invest primarily in equity shares of companies and have a lock-in period of three years.
You can invest up to ₹1.5 lakhs in ELSS funds, and the returns are tax-free. ELSS funds have the potential to provide high returns in the long run and can be an excellent way to create wealth while also saving tax.
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Opt for a Health Insurance Policy To Save Tax
Health insurance policies are an excellent way to save tax and secure your financial future. Premiums paid for health insurance policies are eligible for tax deductions under Section 80D of the Income Tax Act.
As a salaried individual with a save tax for salary above 10 lakhs, you can claim a tax deduction of up to ₹ 25,000 for a health insurance policy for yourself, your spouse, and your dependent children. You can also claim a deduction of up to ₹ 50,000 for a health insurance policy for your parents if they are senior citizens.
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Invest in National Pension System
The National Pension System (NPS) is a retirement-oriented investment option offered by the Indian Government. It allows salaried individuals to save for their retirement and provides tax benefits as well.
Under Section 80CCD(1B) of the Income Tax Act, an individual can claim a deduction of up to ₹ 50,000 for contributions made towards the NPS. Additionally, contributions made by an employer towards the NPS are also eligible for tax deductions.
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Invest in a Fixed Deposit To Save Tax
Fixed Deposits are a secure investment option that provides fixed returns on your investment. The interest earned on fixed deposits is taxable, but you can claim a tax deduction on the amount invested under Section 80C of the Income Tax Act. Fixed deposits have a lock-in period of 5 years, and you can invest up to ₹₹1.5 lakhs in them.
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Claim Tax Deduction on Home Loan Interest
If you have taken a home loan, you can claim tax deductions on the interest paid on the loan. Under Section 24 of the Income Tax Act, you can claim a deduction of up to ₹ 2 lakhs on the interest paid on a home loan for a self-occupied property. If the property is let out, there is no upper limit on the tax deduction for the interest paid.
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Donate to Charity
Donating to a charity is an excellent way to give back to society and save tax at the same time. Under Section 80G of the Income Tax Act, donations made to registered charitable institutions and trusts are eligible for tax deductions.
The tax deduction available for donations can be up to 50% of the donation amount, depending on the charity.
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Claim Tax Deduction on Education Loan
If you have taken an education loan to finance your higher education, you can claim tax deductions on the interest paid on the loan. Under Section 80E of the Income Tax Act, you can claim a tax deduction on the interest paid on the education loan for yourself, your spouse, or your dependent children.
The tax deduction can be claimed for a maximum of 8 years or until the interest is fully paid, whichever is earlier.
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Claim Tax Deduction on HRA
If you are a salaried individual receiving House Rent Allowance (HRA) as part of your salary above ₹10 lakhs, you can claim tax deductions on the HRA. The amount of tax deduction that you can claim on HRA is calculated as the minimum of the following three amounts:
- Actual HRA received from the employer
- Rent paid minus 10% of salary
- 50% of salary if living in a metro city, or 40% of salary if living in a non-metro city
These calculations are often influenced by the guidelines set forth by the pay commission, which periodically reviews and recommends adjustments to salary structures, allowances, and related tax benefits to ensure fairness and competitiveness. By understanding these guidelines, you can better optimize your tax deductions and maximize your take-home pay.
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Opt for NPS Tier II Account To Save Tax
In addition to the NPS Tier I account, the National Pension System also offers a Tier II account that provides more liquidity to investors. The investments made in the Tier II account are not eligible for tax deductions, but the returns earned on these investments are tax-free. You can withdraw funds from the Tier II account anytime, without any lock-in period.
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Claim Tax Deduction on Professional Development Expenses
As a salaried individual, you can claim tax deductions on expenses incurred for your professional development. These expenses include the cost of attending conferences, workshops, and training programs related to your profession.
Under Section 80D of the Income Tax Act, you can claim a tax deduction on the expenses incurred for your professional development up to a maximum of ₹ 5,000 per year.
Conclusion
As a salaried individual earning more than tax for salary above 10 lakhs per annum, several tax-saving options are available to you. These options can optimize your income, create wealth, and secure your financial future. It is essential to consult a financial advisor before making any investments or financial decisions to ensure they align with your financial goals and objectives.
Vakilsearch is an online legal services platform that can assist you with tax planning and filing your income tax returns in India. Our experienced tax experts can guide you on the best tax-saving options and help you optimize your income. Contact us today to learn more.
