Earning a high Salary is a dream of everyone, but along with this salary comes the responsibility of taxes. For smoother functions of government and providing sources to the citizens, income tax plays a crucial role.

All taxpayers must pay their share of tax to the government and file their income tax return regularly, but the government has made several provisions allowing people to save their taxes in specific ways. Many people overpay taxes because they need to be aware of how to save tax for salary above 50 Lakhs.  To explore more on this topic, read on.

As per Indian Government, you come under the high-income category if you earn above Rs 50 lakhs per annum. This calls for the highest income tax bracket also. All this leads to a need for substantial income tax saving planning, which allows you to minimize the tax liability on your salary and enhance your take-home amount.

How to Save Income Tax in India is a simple thing. Several strategies can be used to reduce the income tax burden. All the methods are easy to implement and handy. If your income is above Rs.50 lakhs, you can use the methods below for saving income tax.  This article will discuss how to save tax if your salary is above 50 lakhs and various other details about income tax.

How to Calculate Income Tax on Salary above 50 Lakhs?

Now you have learned how to save tax for a salary above 50 lakhs, it is essential to know how to calculate income tax.

This is the example of the income tax applied on a person earning above lakhs per annum:

Moreover, the eligible earners can claim the following deductions:

Note: You don’t need a home loan or invest in plans under 80C. Consider the following investment to utilize the entire Rs in such a case. 1.5 lakhs limit under section 80C:

• ELSS: Rs. 60,000 ( Investment required will be Rs.500 per month in SIP, the return will be 12% CAGR, and the lock-in period is 3 Years)
• ULIP: The premium amount will be Rs. 12,000
• Children’s education fees: Rs. 25000 – 1 lac)
• EPF: Approx. Rs. 30,000 – 72,000
• The term plan: premium will be Rs. 12000 and provide approx. 1 crore cover

Also, if you calculate as per the new Tax Regime, your tax liability will be :

Tips on How to Save Tax for Salary above 50 Lakhs

As mentioned above, Government has various provisions which help people to save income tax. Here we have listed the best and the most straightforward strategies that you can use to save tax for a salary above 50 lakhs per year:

1. Invest in plans which save tax.

The most effective strategy on how to save tax for salary above 50 lakhs is to choose the investment instruments which help to save tax. According to tot eh section 80C of the Income tax act 1961, you can claim a tax deduction of up to Rs. 1.5 lakhs if you invest in tax-saving investment options. Various investment instruments can help you save tax, such as public provident funds, equity-linked saving schemes, national pension systems, and fixed deposits. The best part of these investment instruments is that they offer good returns, along with saving tax.

2. Maximize the benefits of a home loan.

According to section 70C and section 24 of the income tax act, home loans can help you claim tax deductions on the principal and interest amounts. Deductions up to Rs. 2 lakhs are claimable on the interest amount paid by you for your property. Make sure the property should be self-occupied. Also, a claim deduction of 1.5 lakhs can be made on the principal amount, as per section 80C.

If you rent out the property, you can claim the whole interest amount on the home loan as a deduction from the income you are getting from rent. Therefore, home loans have bi-directional benefits- they save taxes and help you own a property.

3. Use LTA

LTA is the abbreviation of Leave Travel Allowance. It is also one of the most opted strategies on how to save tax for salary above 50 lakhs. You are allowed to claim the tax deduction on your and your family’s domestic travel expenses. You can avail of this benefit 2 times in 4 years block. To get this claim, you must show all the bills for traveling. However, this benefit is only available on domestic traveling. It does not cover the international travel expenses.

4. House rent allowance

Like LTA, there is another allowance HRA (House Rent Allowance), which is also one of the excellent techniques on how to save tax for salary above 50 lakhs. For this, you need to have a rented accommodation. This will help you claim the deduction of tax on HRA. The calculation of HRA depends on your salary and rent.

You can claim a tax deduction on the lowest of any three listed below:

• Actual HRA
• 50% of the basic pay in metro cities
• 40% of basic pay in non-metro cities

So, it’s recommended to avail of HRA benefits to save tax.

5. Make use of section 80D of the Income tax act for health insurance.

We have discussed the tax saving under Section 80 C; now, let’s look at Section 80D for health insurance to know how to save tax for salary above 50 lakhs. It allows you to claim tax deductions on the health insurance premium you pay for yourself, your spouse, and your children. It can be claimed up to Rs.25000. In case you are paying premiums for your parent’s health insurance; you can also claim Rs. 50,000 deductions.

Health insurance helps you to save income tax and safeguard yourself and your family during any medical emergency.

6. Avail of the benefits of NPS.

If you are a high-income category employee, you must wonder how to save tax for salary above 50 lakhs using NPS. Firstly, NPS stands for National Pension System, run by Indian Government. It is an investment option that builds up retirement corpus and saves tax. NPS allows you to claim deductions under section 80CCD (1B) of the income tax act. The deductions allowed to claim are up to rs. 50,000.

7. Donate

Are you thinking about participating in a noble cause? You will be surprised to know it will save your tax also according to section 80G of the income tax act. It states that you can claim tax deductions unto 50% of your donation amount. The donation should be made to a registered charitable.

8. Go for the lower tax regime.

The government has a lower tax regime for those who are ready to leave their deductions and exemptions. You can opt for this tax regime if your salary is above 50 lakhs. It is also one of the ways to save tax for salary above 50 lakhs.

According to this new regime, the new tax rates are:

• 30% for people earning Rs. 50 lakhs to 1 crore.
• 35% for those earning above 1 crore.

Therefore, when you choose the tax regime, give yourself time to calculate your liabilities and select the best one for you.

9. Plan wisely for capital gain.

Many investment options offer you a good capital gain, like stocks and mutual funds, but they call for a capital gain tax on the profit. Real estate income also falls in this category. However, if you plan your capital gain wisely and invest in schemes like ELSS, NPS, etc., you will be allowed the tax deduction and reduce capital gain tax liability.

10. Hire a good Tax expert.

Only some people can understand the tax-saving formulas and make wise decisions. In such a case, hiring a good tax consultant and asking him how to save tax for salary above 50 lakhs is better. He will help you to make informed decisions and explain various provisions related to income tax. He will also help you to invest in different tax saving instruments and help you avail benefits of tax provisions.

Read more: 5 Best Ways To Save Tax For Salaried Employees

Ways to Save Tax for Salary above 50 Lakhs

Some various exemptions and deductions can help you in planning tax. Before paying these deductions and exemptions to your tax plan, you must clearly understand your salary structure. Your salary usually comprises many tax-exempt allowances; the remaining amount is taxable. It will help you to know how to save tax for salary above 50 lakhs.

• Salary – exemptions = taxable pay
• Similarly, taxable pay – deductions = Net taxable pay

This way, you can save maximum tax by using exemptions and deductions.  Let’s discuss exemptions and deductions in detail in the tables below:

1. Exemptions

2. Deduction

Tax Slab as Per Old and New Tax Regime

According to the government tax guidelines, you can select the tax regime during tax filing. Here we have compared both tax regimes for your convenience:

Under the new regime, taxpayers are not allowed to avail tax benefits. Therefore, the tax deductions mentioned above in the article are available if you choose the old tax regime. This will help you make wise decisions on How to Save Income Tax in India.

Conclusion

There are many ways How to Save Income Tax in India. All you need is complete information about your income structure and tax provisions. Specific terms and conditions are there that you must learn before going for tax planning. You can claim tax deductions when filing the ITR. Tax planning is not just about saving tax; it is an essential part of financial planning. So, make wise decisions for saving tax.

How to Save Tax for Salary above 50 Lakhs – FAQs

What will be the tax rate for someone earning above 50 lakhs annually?

Ans. The tax rate for a person earning more than 50 lakhs per annum is Rs. 150,000 + 30% on income more than Rs.. 15,00,000

Please help with the calculation age of senior citizens for tax.

Ans. Older people above 60 are considered senior citizens, and people above 80 are super senior citizens. They have higher income tax exemption limits and benefit from tax rules and regulations.

Are there separate rate slabs for income tax depending on age?

Ans. Yes, tax slabs vary as per the age of taxpayers. The tax slab is divided into people below 60, senior, and super senior citizens. The tax rates are different for firms, LLPs, companies, etc.

What will be the tax rebate on income up to 7 lakhs?

Ans. The tax rebate on income up to 7 lakhs will be rs. 25000 if you opt for a new tax regime. Some various deductions and exemptions can help you save tax.

Is it mandatory to opt for a new tax regime while filing ITR?

Ans. No, you are not bound to choose the new tax regime. You can select the old tax regime also. If you are salaried, you must choose your tax regime at the beginning of the year. You can, however, change the tax regime next year. If you are a business professional, you get only one chance to choose a new tax regime in your lifetime.

The post How to Save Tax for Salary above 50 Lakhs appeared first on Paisabank.