For a salary of Rs. 30,00,000, the tax payable varies significantly between the old and proposed new tax regimes. Under the old tax regime, the tax liability amounts to Rs. 7,25,400. However, if one opts for the proposed new tax regime, the tax payable reduces to Rs. 5,90,200.
EXPLORE FUNDS
Which tax regime is better for 30 lakhs
EXPLORE FUNDS
3 min
12-September-2024
If you are a high-salaried individual, you must plan your taxes strategically. This helps in avoiding a heavy tax burden and leads to more savings. You can do so by utilising various tax-saving instruments and deductions available under the Income Tax Act.
Some key strategies include investing in tax-saving instruments under Section 80C, using deductions available under Sections 80D for health insurance premiums, 80E for education loan interest, and more. Let’s understand how you can save tax for a salary above Rs. 30 lakh in detail.
Budget 2024 Latest Updates
As per the latest Finance Act 2024, changes have been made in the slab rates for the new tax regime as follows:
Tax Slab | Tax Rate |
Up to Rs. 3 lakh | Nil |
Rs. 3 lakh – Rs. 7 lakh | 5% |
Rs. 7 lakh – Rs. 10 lakh | 10% |
Rs. 10 lakh – Rs. 12 lakh | 15% |
Rs. 12 lakh – Rs. 15 lakh | 20% |
More than Rs. 15 lakh | 30% |
In the new tax regime, the standard deduction has been increased from Rs. 50,000 to Rs. 75,000. Additionally, the deduction on family pension has been raised from Rs. 15,000 to Rs. 25,000.
How to save tax for salary above 30 lakhs?
To save tax on a salary above 30 lakh, you can claim the various deductions and exemptions available under the Income Tax Act. Let’s have a look at some major ones:
Section 80C Deductions
- You can Invest up to Rs. 1.5 lakh in instruments like
- Public Provident Fund (PPF)
- National Savings Certificate (NSC)
- Equity-Linked Savings Schemes (ELSS), and
- Tax-saving Fixed Deposits.
- Also, you can claim premiums paid or life insurance policies and the amount paid for tuition fees of your children’s education.
Section 80D
- Claim deductions for health insurance premiums paid for yourself, your family, and your parents.
- The limit is Rs. 25,000 for self, spouse, and children
- However, this limit gets increased to Rs. 50,000 if your insured parents are senior citizens.
Section 80E
- Deduct the interest paid on an education loan for higher studies
- You can claim this deduction for up to eight years or until the interest is fully repaid, whichever comes first.
Section 24(b)
- Deduct the interest paid on a home loan
- You can claim up to Rs. 2 lakh per annum for a self-occupied property.
National Pension System (NPS)
- Under Section 80CCD(1B), you can invest up to Rs. 50,000 in the NPS
- It is essential to note that this deduction is over and above the Rs. 1.5 lakh limit under Section 80C.
Section 80G
- Claim deductions for donations made to specified charitable institutions and funds.
- The amount of deduction varies based on the institution and is either 50% or 100% of the donation amount.
House Rent Allowance (HRA)
- If you live in rented accommodation, you can claim HRA as per Section 10(13A)
- However, you will get this deduction only if:
- You pay rent
and - Your salary structure includes an HRA component.
- You pay rent
Leave Travel Allowance (LTA)
- Claim LTA for travel expenses incurred for vacations within India
- This can be claimed twice in a block of four years.
Income tax slabs under old vs New income tax regime
It must be noted that the Indian Income Tax system offers two distinct regimes: the old and the new tax regimes (effective from April 1, 2020). Each regime provides different tax slabs and benefits. Let us look at the latest income tax slab rates for FY 2024-25 under both of them:
Tax slab | FY 2023-24 (under the old tax regime) | Tax slab | FY 2023-24 (under the new tax regime) |
Up to Rs. 2,50,000 | Nil | Up to Rs. 3,00,000 | Nil |
Rs. 2,50,000 to Rs. 5,00,000 | 5% | Rs. 3,00,000 to Rs. 6,00,000 | 5% |
Rs. 5,00,000 to Rs. 10,00,000 | 20% | Rs. 6,00,000 to Rs. 9,00,000 | 10% |
Rs. 10,00,000 and above | 30% | Rs. 9,00,000 to rs. 12,00,000 | 15% |
- | - | Rs. 12,00,000 to Rs. 15,00,000 | 20% |
- | - | Rs. 15,00,000 and above | 30% |
Ways to save tax on 30 lakh salary
To maximise tax savings, you must be aware of the various sections under which you can claim exemptions and deductions. Both reduce your final tax liability in the following manner:
- Salary - Exemptions = Taxable salary income
- Taxable salary income - Deductions = Net taxable income
It is worth noting that reducing your “net taxable income” directly decreases your overall tax liability. Now, let’s see some key exemptions and deductions that you can claim to reduce your tax:
Part 1- Exemptions
Salary component | Taxability |
Basic | Fully-taxable |
Dearness Allowance (DA) | Fully-taxable |
Professional Tax | Exempt up to Rs. 2,400 (this limit varies from state to state) |
House Rent Allowance (HRA) | The exempt HRA is the least of the following amounts: 1. The actual HRA received by you 2. The actual rent paid minus 10% of the salary 3. 50% of the salary for metro cities or 40% of the salary for non-metro cities (Here, “salary” is calculated as the sum of Basic Salary + Dearness Allowance) |
Food |
|
Leave Travel Allowance (LTA) | You can claim an exemption for actual travel ticket expenses for 2 trips in 4 years |
Children's Education Allowance | Rs. 4,800 per child per annum (maximum 2 children) is exempt from income tax |
Mobile/ Internet Reimbursem*nt | Your entire expense is exempt if used predominantly for office purposes (contingent upon submission of valid proofs and bills) |
Part 2- Deductions
Deduction | Section | Details |
Health Insurance Premium | 80D | You can claim the following deductions for health insurance premiums paid:
or
(Condition: The health insurance premium must not be paid through cash) |
Education Loan Interest | 80E |
|
Charitable Donations | 80G | 50% or 100% of the eligible amount |
Tax-saving instruments | 80C |
|
Disabled dependents | 80DD |
|
Home Loan Payments | 80C/24B |
|
Standard deduction | 16(ia) | You get Rs. 50,000 as deduction without any conditions attached |
Which regime is better for 30 lakh LPA to save tax?
To choose the optimal tax regime for a Rs. 30 lakh annual salary, you must carefully calculate your tax liability under both the old and new tax regimes. Study the table below:
Particulars | Total taxable income - Old regime (in rupees) | Total taxable income - New regime (in rupees) | |
1) | Income under the head salary | 30,00,000 | 30,00,000 |
2) | Less: Standard deduction u/s 16 (ia) | 50,000 | 50,000 |
3) | Net income under the head salary (a-b) | 29,50,000 | 29,50,000 |
4) | Income under the head house property | - | - |
5) | Less: Deduction u/s 24 | - | - |
6) | Net income under the head house property (d-e) | - | - |
7) | Gross total income (c+f) | 29,50,000 | 29,50,000 |
8) | Less: Deduction u/s 80C | 1,50,000 | - |
9) | Less: deduction u/s 80D | 25,000 | - |
10) | Total Income (g-h-i) | 27,75,000 | 29,50,000 |
11) | Less: Basic exemption | 2,50,000 | 3,00,000 |
12) | Taxable income (j-k) | 25,25,000 | 26,50,000 |
13) | Tax on taxable income | 6,45,000 | 5,85,000 |
14) | Health and Education cess | 25,800 | 23,400 |
15) | TaxPayable (m+n) | 6,70,800 | 6,08,400 |
Upon observing the comparison above, opting for the new regime would be more beneficial for you as it would lead to additional tax savings of Rs. 62,400.
For deeper insights, here are additional articles that are closely aligned with your interests
- How to Save Tax on 9 Lakhs Salary
- How to Save Tax for Salary Above 7 Lakhs
- How to Save Tax for Salary Above 20 Lakhs
- How to Save Tax for Salary Above 50 Lakhs
Tax savings strategies for salary above Rs. 30 lakh in India
For individuals with a salary exceeding Rs. 30 lakh in India, effective tax planning is essential to minimise tax liability and maximise savings. This can be done by making use of exemptions and allowable deductions. Let us look at some proven tax-saving strategies:
Deductions under sections 80C, 80CC, and 80CCD
Section 80Callows a maximum deduction of Rs. 1.5 lakh per year for investments and expenses like
- Public Provident Fund (PPF)
- Home loan principal repayment
- Equity-Linked Savings Schemes (ELSS)
- Life insurance premiums
- Employee Provident Fund (EPF)
- Children's tuition fees
- National Savings Certificate (NSC)
Section 80CCC provides deductions for contributions to pension funds, with the combined limit of Rs. 1.5 lakh shared with Section 80C. Moreover, Section 80CCD offers additional deductions for contributions to the National Pension System (NPS), with
- Section 80CCD(1) falling under the Rs. 1.5 lakh limit
and - Section 80CCD(1B) allowing an extra Rs. 50,000 deduction
Medical costs
As per the Income Tax Act of 1961, medical expenses can be deducted under its various sections, such as:
- Section 80D allows deductions for health insurance premiums,
- Up to Rs. 25,000 for self, spouse, and children
and - Up to Rs. 50,000 for senior citizen parents
- Up to Rs. 25,000 for self, spouse, and children
- Section 80DD offers deductions up to Rs. 75,000 (Rs. 1.25 lakh for severe disability) for expenses incurred on medical treatment of a dependent with a disability
- Section 80DDB provides deductions for medical treatment of “specified diseases”,
- Up to Rs. 40,000 for individuals below 60
and - Rs. 1 lakh for senior citizens
- Up to Rs. 40,000 for individuals below 60
Education loan
Under Section 80E of the Income Tax Act, individuals can claim deductions for the interest paid on education loans taken for higher studies. This deduction applies to loans for:
- Oneself
- Spouse
- Children, or
- A student for whom the individual is a legal guardian
- There is no upper limit on the amount that can be claimed, but the deduction is available for up to eight consecutive years. However, you can claim this deduction for up to eight years or until the interest is fully repaid, whichever comes first.
Home loan
Under Section 80C, the principal repayment of up to Rs. 1.5 lakh annually is deductible. Additionally, under Section 24(b), you can claim a deduction of up to Rs. 2 lakh on home loan interest.
Also, first-time homebuyers benefit from an additional deduction of Rs. 50,000 under Section 80EE. By using these provisions, you can reduce your taxable income and make home ownership more affordable.
House rent allowance
You can claim the House Rent Allowance (HRA) as an exemption to reduce your tax liability. The maximum amount you can claim is the lowest of the following:
- Actual HRA received
- 50% of salary for those in metro cities (40% for non-metros)
- Actual rent paid minus 10% of salary
To remain complaint, make sure all your rental agreements are in place and you are properly documenting rent payments.
Leave travel allowance
For the unaware, LTA covers travel expenses for the employee and their family within India. As per the tax laws, exemptions are available for the actual travel costs incurred. This benefit can be claimed for two journeys in a block of four years, and it covers travel by air, rail, or other public transport.
Again, it is necessary to maintain proper documentation, including tickets and boarding passes.
Capital gains
As per the latest Income Tax Laws,
- LTCG from equity investments over Rs. 1 lakh are taxed at 10% (without the benefit of indexation)
- Whereas LTCG from property or debt instruments held over three years benefit from 20% tax (with indexation)
To defer or exempt LTCG tax, you can:
- Invest in specified bonds under Section 54EC
or - Reinvest in residential property under Sections 54 and 54F
ELSS mutual funds
Investments up to Rs. 1.5 lakh in ELSS are eligible for deduction under Section 80C of the Income Tax Act. ELSS comes with a three-year lock-in period. It is the shortest duration among the various tax-saving investment options provided under Section 80C.
ELSS mutual fund schemesprimarily invest in equities and have the potential to provide higher returns compared to other Section 80C instruments.
Summary
Effective tax planning is crucial for individuals earning above Rs. 30 lakh annually in India. This can be done by utilising deductions and exemptions under the Income Tax Act. One of the key strategies includes investing up to Rs. 1.5 lakh in Section 80Cinstruments like PPF, ELSS, and life insurance.
Additionally, you can claim deductions for health insurance premiums under Section 80D and interest on education loans under Section 80E. Also, home loan interest and principal amount deductions are available under Section 80C and 24B, respectively.
Furthermore, always remember to calculate your tax liability under both the old and new tax regimes, as each offers distinct benefits and leads to different tax liabilities. Are you looking to invest in mutual funds and achieve your financial goals? The Bajaj Finserv Platform has listed 1,000+ mutual funds online. Start comparing mutual funds today and start investing!
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Frequently asked questions
How to save maximum tax on a 30 lakh salary?
Maximise your tax savings by utilising all eligible deductions and exemptions under the Income Tax Act, such as making investments u/s 80C (up to Rs. 1.5 lakh deduction), paying health insurance premium u/s 80D (up to Rs. 25,000 or Rs. 50,000 as deduction), interest on higher education loan u/s 80E (no limit) and more.
Which tax regime is better for 30 LPA?
If you do not have substantial savings or deductions to claim, opting for a new regime could offer you more tax advantages. However, before choosing, always compare both regimes by calculating taxes.
Is 30 lakhs a good salary in India?
A salary of 30 lakhs per annum is considered quite good in India. It places one in the higher income bracket, allowing for a comfortable lifestyle, good savings potential, and the ability to afford luxuries and high-quality education for children.
Is 30 lakhs savings good?
Having 30 lakhs in savings is commendable, as it provides a substantial financial cushion. This amount can be used for significant investments, emergencies, or achieving major financial goals such as buying property or funding higher education.
How to avoid income tax on salary?
Avoiding income tax is illegal, but one can reduce tax liability through legal means. Investing in tax-saving instruments like Public Provident Fund (PPF), National Pension Scheme (NPS), and claiming deductions under Section 80C, 80D, and 80E can help minimise tax payable.
How many Indians earn more than 30 lakhs?
A small percentage of Indians earn more than 30 lakhs annually. According to available data, less than 1% of taxpayers report incomes in this range, reflecting the significant income disparity in the country.
How to save tax on 27 lakhs salary?
To save tax on a salary of 27 lakhs, one can invest in tax-saving instruments under Section 80C, utilise deductions for health insurance premiums under Section 80D, and consider contributions to the NPS under Section 80CCD(1B) for additional benefits.
How to save 30 lakhs in 5 years?
Saving 30 lakhs in 5 years requires disciplined financial planning. One should invest in high-yield options like mutual funds, fixed deposits, or systematic investment plans (SIPs). Reducing unnecessary expenses and regularly reviewing investment performance can also help achieve this goal.
Which tax regime is better for 30 lakhs and above?
For incomes of 30 lakhs and above, the old tax regime might be better if one can avail various deductions and exemptions. However, the new tax regime, with lower tax rates and no deductions, could be beneficial for those with fewer exemptions. Comparing both based on individual financial situations is crucial.
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