- Date : 05/03/2023
- Read: 4 mins
By adopting tax-saving measures, you can reduce your tax burden and pay zero tax on a gross salary of ₹10 lakh. From investments in tax-saving instruments to claiming deductions, this comprehensive guide will help you become tax-efficient.
The Income Tax Act 1961 mandates every Indian citizen earning a taxable income to pay taxes to the government. However, with several tax-saving provisions, one can reduce their tax liability and pay zero tax on a gross salary of ₹10 lakh.
In this article, we will discuss various methods to lower your tax burden and help you become tax-efficient.
Understand Your Tax Liability
Before delving into tax-saving measures, one should understand the taxation system and their tax liability. The income tax slabs for the financial year 2023-24 in New Tax Regine are as follows:
If your gross salary is ₹10 lakh, you fall under the 15% tax bracket, and your tax liability is ₹60,000. However, with proper tax planning and choosing Old Tax Regime, you can save this amount.
Slabs for Old Tax Regime are as follows
So how we can have zero tax in Old Tax Regime? Don't worry, keep reading!.
Also Read: 7 Tax Strategies for 2023
Here are some tax-saving measures you can adopt to reduce your tax burden and pay zero tax on a gross salary of ₹10 lakh.
1. Standard Deduction
The standard deduction of ₹50,000 under section 16(ia) of the Income Tax Act is a deduction that is available to all salaried individuals. It means you can reduce your taxable income by up to ₹50,000 without providing any proof of expenses incurred.
This deduction was introduced in the Finance Act 2018 and is available from the assessment year 2019-20 onwards. It replaced the earlier system of providing transport allowance and medical reimbursement to employees, which were taxable.
The standard deduction is available to all salaried individuals, including pensioners. It is a flat deduction of ₹50,000 that can be claimed by individuals against their salary income.
2. Deduction under Section 80C
Section 80C of the Income Tax Act allows individuals to claim a deduction of up to ₹1,50,000 from their gross total income for certain investments and expenses made during the financial year.
Here are some of the investments/expenses that qualify for deduction under section 80C:
- Life Insurance Premium
- Public Provident Fund (PPF)
- National Savings Certificate (NSC)
- Equity Linked Savings Scheme (ELSS)
- Housing Loan Principal
- Tuition Fees
Apart from these, a few other investments and expenses also qualify for the deduction.
Also Read: Get the Facts on Social Security
3. Deductions under Section 80D and 80CCD
Apart from Section 80C, the Income Tax Act offers additional tax-saving provisions under Sections 80D and 80CCD.
Section 80D provides a deduction of up to ₹25,000 on health insurance premiums for self, spouse, and dependent children. For senior citizens, the limit is ₹50,000.
While, Section 80CCD allows a deduction of up to ₹50,000 on contributions made towards the National Pension System (NPS).
4. Deduction under section 24(b)
Section 24(b) of the Income Tax Act allows individuals to claim a deduction on the interest paid on a housing loan. The maximum deduction that can be claimed under this section is ₹2,00,000 per financial year. This deduction is available only if the property is self-occupied. In case the property is let out, there is no upper limit on the amount of deduction that can be claimed.
In addition to the deduction under section 24(b), individuals can also claim a deduction for the repayment of the principal component of the housing loan under section 80C of the Income Tax Act.
5. Rebate under section 87A
After claiming all the deductions, a person can claim a rebate under Section 87A. Section 87A of the Income Tax Act provides a rebate for individual taxpayers whose total income is up to ₹5,00,000.
The maximum amount of rebate that can be claimed under this section is ₹12,500 per financial year. The rebate is applied to the tax liability after considering all the deductions available to the taxpayer under various sections of the Income Tax Act.
Let us summarize all the above here:-
Adopting the above-mentioned tax-saving measures allows you to become tax-efficient and reduce your tax liability. However, judiciously planning your investments and claim deductions is essential to maximize your tax savings.
It is advisable to consult a tax expert or financial advisor to help you with tax planning and guide you through the various investment options available.
The Income Tax Act 1961 mandates every Indian citizen earning a taxable income to pay taxes to the government. However, with several tax-saving provisions, one can reduce their tax liability and pay zero tax on a gross salary of ₹10 lakh.
In this article, we will discuss various methods to lower your tax burden and help you become tax-efficient.
Understand Your Tax Liability
Before delving into tax-saving measures, one should understand the taxation system and their tax liability. The income tax slabs for the financial year 2023-24 in New Tax Regine are as follows:
If your gross salary is ₹10 lakh, you fall under the 15% tax bracket, and your tax liability is ₹60,000. However, with proper tax planning and choosing Old Tax Regime, you can save this amount.
Slabs for Old Tax Regime are as follows
So how we can have zero tax in Old Tax Regime? Don't worry, keep reading!.
Also Read: 7 Tax Strategies for 2023
Here are some tax-saving measures you can adopt to reduce your tax burden and pay zero tax on a gross salary of ₹10 lakh.
1. Standard Deduction
The standard deduction of ₹50,000 under section 16(ia) of the Income Tax Act is a deduction that is available to all salaried individuals. It means you can reduce your taxable income by up to ₹50,000 without providing any proof of expenses incurred.
This deduction was introduced in the Finance Act 2018 and is available from the assessment year 2019-20 onwards. It replaced the earlier system of providing transport allowance and medical reimbursement to employees, which were taxable.
The standard deduction is available to all salaried individuals, including pensioners. It is a flat deduction of ₹50,000 that can be claimed by individuals against their salary income.
2. Deduction under Section 80C
Section 80C of the Income Tax Act allows individuals to claim a deduction of up to ₹1,50,000 from their gross total income for certain investments and expenses made during the financial year.
Here are some of the investments/expenses that qualify for deduction under section 80C:
- Life Insurance Premium
- Public Provident Fund (PPF)
- National Savings Certificate (NSC)
- Equity Linked Savings Scheme (ELSS)
- Housing Loan Principal
- Tuition Fees
Apart from these, a few other investments and expenses also qualify for the deduction.
Also Read: Get the Facts on Social Security
3. Deductions under Section 80D and 80CCD
Apart from Section 80C, the Income Tax Act offers additional tax-saving provisions under Sections 80D and 80CCD.
Section 80D provides a deduction of up to ₹25,000 on health insurance premiums for self, spouse, and dependent children. For senior citizens, the limit is ₹50,000.
While, Section 80CCD allows a deduction of up to ₹50,000 on contributions made towards the National Pension System (NPS).
4. Deduction under section 24(b)
Section 24(b) of the Income Tax Act allows individuals to claim a deduction on the interest paid on a housing loan. The maximum deduction that can be claimed under this section is ₹2,00,000 per financial year. This deduction is available only if the property is self-occupied. In case the property is let out, there is no upper limit on the amount of deduction that can be claimed.
In addition to the deduction under section 24(b), individuals can also claim a deduction for the repayment of the principal component of the housing loan under section 80C of the Income Tax Act.
5. Rebate under section 87A
After claiming all the deductions, a person can claim a rebate under Section 87A. Section 87A of the Income Tax Act provides a rebate for individual taxpayers whose total income is up to ₹5,00,000.
The maximum amount of rebate that can be claimed under this section is ₹12,500 per financial year. The rebate is applied to the tax liability after considering all the deductions available to the taxpayer under various sections of the Income Tax Act.
Let us summarize all the above here:-
Adopting the above-mentioned tax-saving measures allows you to become tax-efficient and reduce your tax liability. However, judiciously planning your investments and claim deductions is essential to maximize your tax savings.
It is advisable to consult a tax expert or financial advisor to help you with tax planning and guide you through the various investment options available.
