If you’re earning above ₹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 50-lakh salary under the different tax regimes in India and maximise your savings.
What are the Different Tax Regimes in India?
Before we move on to 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.
How to Save Taxes 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 ₹ 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 ₹ 50,000.
How to Save Taxes 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 ₹ 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.
How to Save Tax 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 on a 50-lakh salary or above.
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.
2. Take life and health insurance
Investing in life insurance will allow you a deduction of ₹ 1.5 lakhs under Section 80C. On the other hand, purchasing health insurance for yourself and your loved ones can give you a tax benefit of ₹ 25,000 or even ₹ 50,000 if you are 60 or above.
3. Utilise your House Rent Allowance (HRA)
If you live in a rented house and get an HRA as a 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.
4. Make a charitable donation
If you contribute to any relief funds or charitable organisations, 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, demand draft, or cash, not in kind.
5. Leverage home loan benefits
You can even avail of tax deductions on your home loan interest payments of up to ₹ 2 lakhs and ₹ 5 lakhs on principal repayments.
6. Choose the right tax regime
Choosing the right tax regime is crucial for optimising 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.
The Bottom Line
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 minimise stress but also unlock significant savings opportunities.
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FAQs
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.
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.
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.
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%.
10 March 2025
4 mins read
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