BEST WAYS TO SAVE TAX IF YOUR SALARY IS MORE THAN ₹10 LAKHS

Earning more than 10 lakh per annum in India can put you in one of the highest tax slabs, and you end up paying a huge amount of your hard-earned salary to the government in the form of tax. So, to avoid such a situation, one must know about tax efficiency, not just as a compliance but as a necessity. This one thing can help you in reducing your tax liability; you just need to make the right decisions at the right time.

Income tax saving can only be done by proper tax planning. One must know how to save tax in India, Section 80C deductions, income tax slab for AY 2025-2026, Tax exemptions for salaried employees, Tax tax-saving investments.

In this article we are going to discuss all the above-mentioned points and try to understand every aspect of the tax slab of the year 2025-2026. 

Platforms like TMWala are there to help you out in understanding which tax slab you fall into, what kind of deduction you are eligible for, and how you can reduce your tax liability. 

INCOME TAX SLAB FOR AY 2025-26

On 1 February 2025, when the budget was introduced by Finance Minister Nirmala Sitharaman, a significant change in tax slab was introduced. As per the budget 2025, the basic exemption limit has been enhanced to 4 lakhs, and a tax rate of 25% was also introduced. A table explaining the tax slab is mentioned herewith:

TAX EXEMPTIONS FOR SALARIED EMPLOYEES

The tax regime for the AY 2025-2026 simplifies tax calculations and benefits salaried employees. The major exceptions a salaried employee has under this tax regime are: 

1. Standard deduction of ₹75,000

Additionally, salaried employees are eligible for the standard deduction of ₹75,000, which considerably lowers their taxable income.

2. TDS Provisions under the New Regime

• Higher Exemption Limit: There will be fewer taxpayers since those making up to ₹4,00,000 will not be subject to taxes.
• Section 87A Rebate: A refund of up to ₹60,000 is provided for incomes up to ₹12,000,000, thereby removing the tax obligation for certain individuals.
• Updated Deduction on Rent Payments: The yearly rental payment threshold for TDS deduction has been raised to ₹6 lakh.

SECTION 80C DEDUCTIONS

There are some investments and expenses that are exempted from tax as per section 80C of the Income Tax Act. The reduction can be as much as Rs. 1.5 lakh under section 80C, if you divide your income among various financial assets, such as PPF, NSC, ELSS, etc.

HOW TO SAVE TAX IN INDIA

Even though the new tax regime offers lower tax rates, it removes most common deductions. However, there are still a few legitimate ways for Income tax saving, the first two of them, i.e, employer’s contribution to PF & NPS and home loan interest on rental properties, are great tax-saving investments. Here’s a quick breakdown:

1. Employer’s Contribution to PF & NPS  

• PF (Provident Fund): Your employer contributes 12% of your basic salary. This is not taxable, up to a combined limit of ₹7.5 lakh/year (including NPS and other contributions).
• NPS (National Pension System): The Employer can contribute up to 14% of your basic salary, which is also tax-free under Section 80CCD(2).

2. Home Loan Interest on Rental Properties

• If you rent out a property you bought using a home loan, you can deduct the interest paid from your rental income under Section 24(b).
• This reduces your taxable rental income.
• Also, you get a standard deduction of 30% on rental income (after property taxes).

3. Reimbursements 

Many companies offer tax-free reimbursements as part of your salary if you submit valid bills. The reimbursements are granted on: 

• Fuel/travel
• The driver’s salary
• Internet/phone
• Books & periodicals
• Food cost during travel
• Stays 

These are not taxed in either regime if proper bills are submitted.

4. Other Tax-Free Benefits in the New Regime

Some specific exemptions are still allowed:

• Family pension: Tax-free up to ₹25,000, or 33.33%.
• Gifts: From non-relatives up to ₹50,000 in a year are not taxed.
• Gratuity: Up to ₹20 lakh is tax-free.
• Voluntary retirement benefits: Up to ₹5 lakh.
• Leave encashment on retirement/resignation: Up to ₹25 lakh.
• Official travel/conveyance allowance and daily allowances for out-of-office work.
• Non-taxable perquisites: e.g., company laptops, medical facilities, or interest-free loans.

TMWala can help you identify which tax deduction you are eligible for. 

TAX PLANNING INDIA

Tax planning starts with understanding the applicable tax slabs under the new tax regimes. The new regime (under Section 115BAC) offers simplified tax rates and higher standard deductions but removes most exemptions and deductions. To make the most of tax-saving opportunities, salaried individuals should carefully assess their income structure and available benefits. Employer contributions to NPS under Section 80 CCD (2), for instance, are tax-deductible under both old and new regimes, offering a strategic advantage.

Additionally, reimbursements like phone bills, internet expenses, and official allowances can be structured to reduce taxable income. Timely filing of income tax returns is equally important to avoid penalties and interest. Ultimately, choosing the right regime depends on one’s salary structure and eligible deductions, and it’s advisable to compare both regimes before filing to ensure maximum tax efficiency.

CONCLUSION

In conclusion, income tax saving is not just about reducing your tax but about making the right financial decisions throughout the year. With effective tax planning in India, salaried individuals can significantly reduce their tax liability while staying compliant. Knowing how to save tax in India, whether through employer contributions, property investments, or strategic use of Section 80C deductions, can lead to substantial savings. Understanding the income tax slab for AY 2025-26 and utilizing available tax exemptions for salaried employees is key. Finally, choosing the right tax-saving investments tailored to your income structure ensures maximum tax efficiency and better financial health.

TMWala can help reduce your tax liability using correct tax deduction methods and make sure to fulfill all the compliance within time limits.