If you earn ₹10 lakh per year, you are in a significant tax bracket in India. Without proper planning, you could end up paying ₹75,000 to ₹1,00,000 or more in income tax every year. The good news is that Indian tax laws offer several legitimate ways to reduce your tax burden significantly — sometimes to zero.
In this guide, we walk through every available deduction and exemption for a ₹10 lakh salary in FY 2024-25, compare both tax regimes, and show you exactly how to save maximum tax legally.
Your Tax Liability Without Planning
Let us first understand what you owe without any planning:
Under New Tax Regime (FY 2024-25):
- Gross salary: ₹10,00,000
- Standard deduction: ₹75,000
- Taxable income: ₹9,25,000
Tax calculation:
- Up to ₹3,00,000: NIL
- ₹3,00,001 to ₹7,00,000: 5% = ₹20,000
- ₹7,00,001 to ₹9,25,000: 10% = ₹22,500
- Total tax: ₹42,500
- Add 4% cess: ₹1,700
- Total tax payable: ₹44,200
Under Old Tax Regime (without any deductions):
- Gross salary: ₹10,00,000
- Standard deduction: ₹50,000
- Taxable income: ₹9,50,000
Tax calculation:
- Up to ₹2,50,000: NIL
- ₹2,50,001 to ₹5,00,000: 5% = ₹12,500
- ₹5,00,001 to ₹9,50,000: 20% = ₹90,000
- Total tax: ₹1,02,500
- Add 4% cess: ₹4,100
- Total tax payable: ₹1,06,600
Clearly the new regime is better without deductions. But with deductions the old regime can win — let us see how.
Step 1 — Section 80C (Save up to ₹46,800)
Section 80C allows deduction up to ₹1,50,000 per year. This is available only under the old tax regime.
Best 80C investment options:
- EPF (Employee Provident Fund): Already deducted from salary — check your payslip. Most salaried employees contribute 12% of basic salary.
- PPF (Public Provident Fund): Safe, tax-free returns at 7.1%. Can invest up to ₹1.5 lakh per year.
- ELSS Mutual Funds: Equity-linked savings scheme. Shortest lock-in of 3 years among 80C options. Potential returns of 12–15%.
- Life Insurance Premium: If you have a term or endowment policy, the premium qualifies under 80C.
- Home Loan Principal: Principal repayment on home loan qualifies under 80C.
- Children's Tuition Fees:Fees paid for up to 2 children's full-time education qualifies.
- NSC (National Savings Certificate): Post office scheme with 7.7% interest.
- Tax-saving Fixed Deposit: 5-year FD with any bank. Interest is taxable.
- Tax saved at 20% slab: ₹1,50,000 × 20% = ₹30,000
- Tax saved at 30% slab: ₹1,50,000 × 30% = ₹45,000
Step 2 — Section 80D Health Insurance (Save up to ₹15,600)
Section 80D allows deduction for health insurance premiums:
- Self, spouse, children: Up to ₹25,000 per year
- Parents (below 60): Additional ₹25,000
- Parents (above 60): Additional ₹50,000
For a person with family floater health insurance (₹25,000 premium) and parents' insurance (₹25,000):
- Total deduction: ₹50,000
- Tax saved at 20% slab: ₹10,000
Health insurance is a must-have anyway — the tax benefit is a bonus. A good family floater policy for ₹10–15 lakh coverage costs ₹12,000–₹25,000 per year.
Step 3 — HRA Exemption (Save up to ₹60,000+)
If you live in a rented house, HRA exemption can be your biggest tax saver.
For a ₹10 lakh salary employee in Chennai or Madurai:
- Basic salary (typically 40–50% of CTC): ₹4,00,000/year
- HRA received: ₹1,60,000/year (₹13,333/month)
- Actual rent paid: ₹1,80,000/year (₹15,000/month)
- City: Non-metro
HRA exemption = minimum of:
- Actual HRA received: ₹1,60,000
- Rent − 10% of basic: ₹1,80,000 − ₹40,000 = ₹1,40,000
- 40% of basic (non-metro): ₹1,60,000
- HRA exempt: ₹1,40,000
- Tax saved at 20% slab: ₹28,000
Important: You must actually pay rent and maintain rent receipts. If paying rent to parents, ensure they declare rental income in their ITR.
Step 4 — Section 80CCD(1B) NPS (Save up to ₹15,600)
Section 80CCD(1B) allows an additional deduction of ₹50,000 for contribution to National Pension System (NPS) — over and above the ₹1.5 lakh 80C limit.
This is one of the most underutilized tax benefits in India.
NPS benefits:
- Additional ₹50,000 deduction (separate from 80C)
- Tax-free returns during accumulation
- Government-regulated, low-cost fund management
- On maturity, 60% is tax-free withdrawal
Tax saved at 20% slab: ₹50,000 × 20% = ₹10,000
The only drawback: NPS is locked until age 60 (partial withdrawal allowed after 3 years for specific reasons).
Step 5 — Section 24(b) Home Loan Interest (Save up to ₹60,000)
If you have a home loan, you can claim deduction on interest paid up to ₹2,00,000 per year under Section 24(b).
For a ₹40 lakh home loan at 8.75% for 20 years:
- Monthly EMI: approximately ₹35,240
- Interest in first year: approximately ₹3,47,000
- Deduction allowed: ₹2,00,000 (capped)
- Tax saved at 20% slab: ₹40,000
- Tax saved at 30% slab: ₹60,000
Note: This deduction is available under both old and new regime for let-out properties. For self-occupied property, it is available only under old regime.
Old Regime vs New Regime for ₹10 Lakh Salary
| Deduction | Amount | Old Regime | New Regime |
|---|
| Standard deduction | ₹50,000 / ₹75,000 | ✓ | ✓ |
| Section 80C | ₹1,50,000 | ✓ | ✗ |
| Section 80D | ₹25,000 | ✓ | ✗ |
| HRA exemption | ₹1,40,000 | ✓ | ✗ |
| NPS 80CCD(1B) | ₹50,000 | ✓ | ✗ |
| Home loan interest | ₹2,00,000 | ✓ | ✗ |
| Total deductions | ₹5,65,000 | ✓ | ✗ |
Old regime with all deductions:
- Gross income: ₹10,00,000
- Total deductions: ₹5,65,000
- Taxable income: ₹4,35,000
- Tax: ₹9,250 (5% on ₹1,85,000)
- Add 4% cess: ₹370
- Total tax: ₹9,620
New regime (no deductions except standard): Total tax: ₹44,200
Savings with old regime: ₹34,580
Conclusion: If you can claim all these deductions, old regime saves significantly more for a ₹10 lakh salary.
Complete Tax Saving Summary for ₹10 Lakh Salary
| Strategy | Deduction | Tax Saved (20% slab) |
|---|
| Section 80C (EPF + PPF + ELSS) | ₹1,50,000 | ₹30,000 |
| Section 80D (Health insurance) | ₹25,000 | ₹5,000 |
| HRA exemption | ₹1,40,000 | ₹28,000 |
| NPS Section 80CCD(1B) | ₹50,000 | ₹10,000 |
| Home loan interest 24(b) | ₹2,00,000 | ₹40,000 |
| Standard deduction | ₹50,000 | ₹10,000 |
| Total | ₹6,15,000 | ₹1,23,000 |
With proper planning, a ₹10 lakh salary earner can reduce tax liability from ₹1,06,600 to under ₹10,000 — saving over ₹96,000 per year. That is money better invested in your future.
3 Quick Wins You Can Do Right Now
- Check your EPF contribution — Log into your EPFO account and confirm your employer is depositing your PF. This is your easiest 80C deduction with zero extra effort.
- Buy health insurance if you do not have one — A basic family floater policy of ₹10 lakh cover costs just ₹8,000–₹15,000 per year and gives you ₹25,000 in tax deduction plus actual health protection.
- Open a PPF account — If you have not used your full ₹1.5 lakh 80C limit, invest the remaining amount in PPF before March 31. You can open a PPF account online through SBI, PNB, or India Post.
Calculate Your Exact Tax Now
Use our free Income Tax Calculator to see exactly how much tax you owe under both regimes and find your best option.