As per a recent report by The Financial Express, salaried employees in India expect tax relief on work from home expenses in the upcoming Union Budget 2021 to be tabled on February 1, 2021. They want the Government to consider the additional burden on employees because of working from home during the COVID-19 period. They have requested the Government to provide for deductions or exemptions for these additional expenses.
There are a lot of ways by which you can save income tax on salary. Further, the only thing you need to do here is to apply tax-saving instruments smartly. In this blog, we will tell you how effectively you can Save Tax on salary income.
Hence, before diving into more details, let’s have a close look at the new Income Tax Slabs proposed in budget 2020, in comparison to the pre-budget 2020 tax slabs.
New income tax slabs in budget 2020 (for FY 2020-21)
| Taxable Income Range (In Rs.) | Tax Rate before Budget 2020 (Old regime) | Tax Rate after Budget 2020 (new regime) |
| 0-2.5 lakh | Exempted | Exempted |
| 2.5-5 lakh | 5% | 5% |
| 5-7.5 lakh | 20% | 10% |
| 7.5-10 lakh | 20% | 15% |
| 10-12.5 lakh | 30% | 20% |
| 12.5-15 lakh | 30% | 25% |
| Above 15 lakh | 30% | 30% |
Note:
Surcharge & Cess on income tax in the new tax regime remain the same as before
The taxpayers are given the option to either continue with the old tax regime or to opt for the new regime. Additionally, if you opt for the new tax regime, you will not be eligible to avail of the deductions and exemptions, to save income tax India salary. Further, This choice has to be made at the time of filing the IT return.
How to save tax on a salary of Rs 15 Lakh Per Annum?
Do you want to stick to the previous tax regime or would like to shift to the new regime? Well, this decision would influence how much you can save income tax on salary.
The following table will give you a fair idea on how to save tax salary –
| Income (₹) | Tax in Old regime (₹) | The Tax in Old regime (₹) | Tax in new regime (₹) | Difference (₹) |
| (without deduction) | (with deduction) | |||
| 14 lakhs | 242000 | 179400 | 169000 | 10,400 |
| 15 lakhs | 273000 | 210600 | 195000 | 15600 |
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*Assuming ₹ 50,000 in the standard deduction and ₹ 150000 in tax exemption u/s 80(C)
Additionally, the table shows if your salary is Rs 15 LPA, you can save up to Rs 15,600 if you switch over to the new tax regime. This is, of course, assuming that you are claiming full exemption u/s 80 C and also availing the standard deduction of Rs 50,000, to save tax on salary income.
But there is a catch too! If you invest in the maximum available capacity in all the avenues, you stand to gain more by sticking to the old tax regime.
The example given below will make it clear to you-
Moreover, let us now suppose you are capable of making enough tax-saving investment to avail the maximum deduction possible in various tax-saving avenues permitted by the IT department (as shown below)-
| Exemption category | Maximum deduction amount (₹) |
| Standard deduction | 50000 |
| Investments under section 80 C | 150000 |
| Medical insurance premium | 25000 |
| NPS deduction | 50000 |
| Savings bank interest | 10000 |
| Housing loan interest | 200000 |
| Total | 485000 |
But, if you switch over to the new tax regime, you can no longer avail of these tax saving options. Further, this means, you will not be able to save Rs 4, 85, 000 which would have been possible, had you stuck to the old income tax regime. Moreover, here is a comparison of your tax liabilities in both the old and new Income tax regime.
| Category | New tax regime (₹) | Old tax regime (₹) |
| Income | 1500000 | 1500000 |
| Deductions | 0 | 485000 |
| Taxable income | 1500000 | 1015000 |
| Income tax | 188000 | 117000 |
| Cess | 7500 | 4680 |
| Tax liability | 195500 | 121680 |
Further, the above table clearly shows that even though you can save Rs 15,600 by switching over to the new tax regime, you can not avail of the exemptions and deductions that prevailed in the old regime. Thus, if you are in a position to invest more in tax-saving avenues and gain maximum exemption/deduction possible, it is better to stick to the old tax regime. Additionally, in this scenario, you can have a comparative gain up to Rs 73820, if you stick to the old tax regime.
Frequently asked questions
How can I save tax if I earn 15 lakh?
The amount of tax you can save depends upon whether you stick to the old tax regime or switch over to the new tax regime.
Additionally, let us assume you intend to avail ₹ 50,000 in the standard deduction and ₹ 150000 in tax exemption u/s 80(C).
A) In old tax regime–
Moreover, your tax liability will be Rs 2,10,600 after taking your deduction and exemption into account.
B) In new tax regime–
Further, You are not allowed to avail of any deduction/exemption in this tax structure. Your total tax liability is Rs 195000.
You stand to gain Rs 15600 if you switch over to the new tax regime.
2. Is 15 lakhs a good salary in India?
Further, if you are fairly young and have no ailments, 15 lakhs per annum is considered a good salary by Indian standards.
3. How much tax do I pay on 15 lakhs?
A) In old tax regime–
Your tax liability will be Rs 2, 10,600 (*Assuming you avail ₹ 50,000 in the standard deduction and ₹ 150000 in tax exemption u/s 80(C))
B) In new tax regime–
You are not allowed to avail any deduction/exemption in this tax structure. Your total tax liability is Rs 195000.
4. Which Indian job has the highest salary?
It is difficult to say. However, the latest trends say management professionals are paid the highest salary in India.
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