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How to save tax for a salary above 50 lakhs?

How to save tax for a salary above 50 lakhs?

If you’re earning above Rs. 50 lakh a year, it puts you in the highest tax bracket, which can mean you have to worry about the high tax payments that come with it. But that’s far from true.

With the right planning, you can significantly reduce your tax burden while staying fully compliant with the law. Keep reading to discover strategies on how to save taxes on a INR 50-lakh salary under the different tax regimes in India and maximize your savings.

Income tax regimes & slabs for income above Rs. 50 lakhs

Before we move on to the strategies to save taxes, it’s important to understand the current tax regimes in India.

Under the Income Tax Act 1961, the government levies direct taxes on individual incomes. However, in 2020-21, a new tax regime was introduced with revised tax rates and methods, offering an alternative to the existing system.

So, currently, there are two tax regimes in India, old and new, under which you can file your income taxes.

Tax exemptions and allowances for Rs. 50 lakh+ salaried individuals

Salaried individuals earning more than Rs. 50 lakh a year can lower their tax burden by wisely using available exemptions and allowances. In most cases, opting for the new tax regime is beneficial as it offers a standard deduction of Rs. 75,000. However, if you have home loan interest, health insurance premiums, tax-saving investments, and other deductions amounting to more than Rs. 4,83,330, you can go for the old regime to save income tax on a 50 lakh rupees salary. The old regime also offers exemptions like House Rent Allowance (HRA), Leave Travel Allowance (LTA), hostel allowance, children’s education allowance, food coupons, etc. Employer contributions to EPF and NPS can also provide tax efficiency.

How to save tax on 50 lakhs under the old tax regime?

The old tax regime benefits high-income earners by offering multiple deductions and exemptions, significantly lowering the taxable income. Some of the deductions of the old tax regime under different sections of the Income Tax Act include:

  1. Deductions under Section 80C if you invest in Public Provident Fund (PPF), National Savings Certificate (NSC), Employees Provident Fund (EPF), National Pension System (NPS), Equity Linked Savings Scheme (ELSS), Fixed Deposit of five years or more, and home loan repayment.
  2. Deductions under Section 80D include premiums on health insurance of up to Rs. 25,000.
  3. Deductions under Section 80E include the entire interest you pay on an education loan.
  4. Deductions under Section 80G include the donations you make to charitable institutions.
  5. Deductions under Section 80DD include the costs for the treatment of any disabled dependents.
  6. A standard deduction of Rs. 50,000.

How to save tax on Rs. 50 lakhs under the new tax regime?

The new tax regime offers lower tax slab rates but fewer opportunities for exemptions and deductions.

Some of the deductions are:

  1. A standard deduction of Rs. 75,000
  2. Deductions on gratuity, voluntary retirement, and leave encashments
  3. Deductions on travel allowances for work purposes
  4. Deductions on family pension income
  5. Deductions on transport allowances incurred by disabled individuals

Top tax-saving strategies for a salary above 50 lakhs

Now that we have explored some of the tax-saving options available under different tax regimes, let’s dive into effective strategies to save tax for Rs. 50 lakhs in India.

  1. Explore different tax-saving investment products

Invest in different investment products such as PPF, NPS, FDs, ELSS, EPF, NSC, etc. These instruments provide attractive tax benefits under Section 80C of the Income Tax Act, 1961.

  1. Take life and health insurance

Investing in life insurance will allow you a deduction of Rs. 1.5 lakh under Section 80C. On the other hand, purchasing health insurance for yourself and your loved ones can give you a tax benefit of Rs. 25,000 or even Rs. 50,000 if you are 60 or above.

  1. Utilize your House Rent Allowance (HRA)

If you live in a rented house and get an HRA as part of your salary, you can use your rent documents to claim HRA exemptions while filing for your income tax as per the prescribed limits.

  1. Make a charitable donation

If you contribute to any relief funds or charitable organizations, you are eligible for tax benefits of up to 50% or 100% of the donations made. This donation should only be made in a cheque, a demand draft, or cash, not in kind.

  1. Leverage home loan benefits

You can even avail of tax deductions on your home loan interest payments of up to Rs. 2 lakh and Rs. 5 lakh on principal repayments.

  1. Choose the right tax regime

Choosing the right tax regime is crucial for optimizing your tax savings. While the old tax regime offers higher deductions to those who invest a lot, the new tax regime has lower tax rates and is beneficial for those who do not invest much.

Tax-saving example: Calculation for 50 lakh salary (Old vs New regime)

The following example calculates income tax on a 50 lakh rupees salary under the old vs the new regime. It assumes investments in ELSS, ULIP, EPF, etc., to claim deductions of up to Rs. 1.5 lakh under Section 80C.

ParticularsOld tax regime (FY 2025-26)New tax regime (FY 2025-26)
 Gross salary50,00,00050,00,000
Less: Exemptions  
Standard deduction(50,000)(75,000)
House Rent Allowance(3,50,000)NA
Leave Travel Allowance(60,000)NA
Children’s Education and Hostel Allowance(9,600)NA
Professional Tax(2,400)NA
Taxable Salary Income45,28,00049,25,000
Less: Deductions  
80E(25,000)NA
80D(50,000)NA
80C(1,50,000)NA
Total Taxable Income43,03,00049,25,000
Net income tax on a 50 lakh rupee salary11,03,40011,67,500
Total tax (including health and education cess @4%)11,47,53610,99,800

Opting for the new tax regime helps to save Rs. 47,736 compared to the income tax payable under the old regime.

Conclusion

Income taxes can sometimes feel like the greatest financial burden. But it doesn’t have to be like that. Whether you earn 50 lakhs or 15 lakhs, income tax strategies that involve exemptions, deductions, and strategic investments can not only minimize stress but also unlock significant savings opportunities.

If you are looking for reliable loan options, turn to Tata Capital, which offers attractive loan terms with flexible tenures and minimal documentation.

To learn more, visit the Tata Capital website or download the app today!

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FAQs

How much income tax will I pay on a 50 lakh salary in India?

The amount of tax you must pay on an income of 50 lakhs depends on your age, tax regime, and sources of income. A rough estimation puts your taxable amount in the old tax regime at ₹ 13,50,000 and in the new tax regime at ₹ 12,87,000, without any deductions.

Which tax regime is better for 50 lakhs?

For a high salary of 50 lakhs, individuals with a lot of investments may opt for the old tax regime as it gives more deductions. However, if your investments are less, you may go for a new tax regime.

How to reduce tax on 50 lakhs salary?

You can take the benefits of exemptions and deductions offered under both old and new tax regimes to save tax on your 50 lakhs salary. You can invest in tax-saving investment products, utilise your HRA and home loan benefits, make a charity, invest in education, and more.

What tax slab applies to a salary above 50 lakhs?

The highest tax slab under the old tax regime is ₹ 10,00,000 and above, and the tax rate on it is 30%. For the new tax regime, the highest tax slab is ₹ 15,00,001 and beyond, with a tax rate of 30%.

What additional surcharge applies to salaries above 50 lakhs?

If your income is above Rs. 50 lakh but below Rs. 1 crore, an additional surcharge of 10% applies on tax. A health and education cess of 4% is also applicable.

How can I maximize deductions under Section 80C for high income?

You can maximize Section 80C deductions by exhausting the investment limit of Rs. 1.5 lakh. You can use options like EPF, ELSS mutual funds, PPF, life insurance premiums, and home loan principal repayment.

What are the common mistakes to avoid for tax-saving on a salary above 50 lakhs?

The common mistakes to avoid include missing deadlines, choosing the wrong tax regime, ignoring the impact of surcharge, and investing poorly. Another mistake to avoid is assuming without comparison that the income tax slab above 50 lakhs salary is the same under the old and new tax regimes.

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