How to Save Tax for Salary Above 10 Lakhs?

What Has Changed in the FY 2026-27?

Before understanding the ways to reduce your tax liability legally, let us explore what has changed in the FY 2026-27:

• The new tax regime is now the default, meaning you have to actively opt out to keep the old tax regime.
• Income up to ₹12 lakhs is effectively tax-free under the new regime, due to the Section 156 (previously known as Section 87A rebate.
• Standard deduction under the new regime went up to ₹75,000.
• Employer NPS contribution limit rose to 14% of basic salary under the new regime.
• The Income Tax Act 2025 was notified, and it takes effect from April 2026, with revised perquisite limits that can meaningfully change your take-home.

What is Your Actual Tax Liability on a Salary Above ₹10 Lakhs?

Before making tax-saving strategies, it is a good idea to take a look at the numbers. You should know what the government actually takes from you, and under which tax system. India currently runs two parallel tax systems. You can pick any one of them each financial year. They have different slab rates, different deductions, and at certain income levels different outcomes. Let us see how these two tax systems differ from one another:

Old Regime

New Regime

How Much Tax Would You Pay at Different Salary Levels?

This table shows tax liability with no deductions applied at all with just the slab rates doing their work.

The pattern is clear. At zero deductions, the new regime wins at every income level. But the moment you add HRA, home loan interest, and Section 123 investments, the gap narrows and sometimes reverses.

New vs Old Tax Regime: Which is Better for Your Salary?

This is the question every taxpayer asks, and the answer depends.

The New Regime Suits Best When

• You have minimal investments and do not actively indulge in tax planning.
• You do not pay rent, so there is no HRA to claim.
• You have no home loan on a self-occupied property.
• Your parents are in good health, and you are not buying separate health insurance for them.
• Your salary is ₹10 lakhs or ₹12 lakhs, and you pay zero tax anyway under the new regime.

The Old Regime Suits Best When

• You pay significant rent in a metro city because HRA exemption alone can run ₹1.2–2.4 lakhs a year.
• You are repaying a home loan on a property you live in (up to ₹2 lakhs in interest under Section 24(b)).
• You are already invested in PPF, ELSS, or life insurance.
• You have made an additional NPS contribution of ₹50,000 under Section 124 (previously Section 80CCD(1B)).
• Both you and your parents need health insurance.
• Your combined deductions exceed ₹3.5 lakhs at a ₹15 lakhs salary, or ₹5.5 lakhs at ₹20 lakhs.

Zero Tax on ₹10 Lakh+ Salary: Is It Actually Possible?

If you earn more than ₹10 lakhs, it might cross your mind: is it possible to have zero tax liability with this income? The answer is yes, and at specific salary levels, it does not even require any active effort on your part. Here is how you can do it:

Under the New Regime

If your gross salary is ₹10 lakhs and you have chosen the new regime, your tax bill will be zero. Not because there is no tax on paper; technically there is, but Section 156 gives you a rebate of up to ₹60,000, which reduces the entire tax liability.

Same story at ₹12 lakhs. After the ₹75,000 standard deduction, your taxable income is ₹11.25 lakhs, and the tax comes to exactly ₹60,000. The rebate covers it entirely and tax payable is ₹0.

Under the Old Regime

At ₹10 lakhs under the old regime, you can also get to zero, but it takes deliberate planning. Here is a realistic scenario for a salaried employee in a metro city, paying rent:

How to Push Zero Tax Beyond ₹12 Lakhs via The NPS Strategy

When the government announced zero tax on ₹13.7 lakhs salary in Budget 2025, it came as a surprise to a lot of people. A salaried employee earning ₹13.7 lakhs can pay zero tax under the new regime, but only if their employer contributes 14% of basic salary to their NPS account.

Let us assume your basic salary is 50% of gross, which is ₹6.85 lakhs. Employer NPS at 14% is approximately ₹96,000, and the standard deduction is ₹75,000. Your total deductions would be ₹1,71,000. Therefore,

Taxable income = ₹13,70,000 − ₹1,71,000 = ₹11,99,000.

Since taxable income is just under ₹12 lakhs, the Section 156 rebate kicks in and the tax liability becomes ₹0.

It is important to note that your employer has to contribute 14% of basic salary to the NPS account.

Tax-saving Deductions Under the Old Tax Regime

If you are choosing the old regime, understanding the deductions is important. Here are the deductions available under the old tax regime:

Section 123

Section 123 (previously known as Section 80C) is the starting point for tax saving under the old regime, with a deduction benefit of up to ₹1.5 lakh. Common options include ELSS, EPF, PPF, Sukanya Samriddhi Yojana, tax-saver fixed deposits, and NSC.

Section 80CCD(1B)

Under this section, you get an additional ₹50,000 deduction for investing in NPS (National Pension System) from your own pocket on top of the ₹1.5 lakh Section 123 limit.

Combined, Section 123 and Section 124 give you ₹2 lakhs in total deductions. At a 30% tax rate, these two can help you save ₹60,000 per year. It is worth noting that NPS locks your money until age 60, and 40% of the corpus must be used to purchase an annuity on maturity. If you are 27 with no interest in a pension structure, investing in ELSS might be a smarter use of that ₹50,000 deduction.

Section 126

If done properly, Section 126 (previously known as Section 80D) delivers ₹50,000 to ₹1 lakh in deductions. If you pay health insurance premiums for yourself, your spouse, children, or parents, that can support tax planning alongside risk protection. It is one of the more practical deductions because it meets a real-life need while also helping with tax efficiency.

HRA

If you rent your home, House Rent Allowance (HRA) is your strongest shield against the tax authority. You just have to make sure you submit your rental agreements and your landlord’s PAN on time. Similarly, Leave Travel Allowance (LTA) lets you claim tax exemptions on domestic flight or train tickets twice within a four-year block.

Section 24(b): Home Loan Interest

Repaying a home loan on a property you live in? The interest paid is deductible up to ₹2 lakhs per year. At a 30% slab, that is ₹60,000 in annual tax savings.

Section 129: Education Loan Interest

If you or your spouse or children took an education loan from a recognized institution, the interest paid is fully deductible with no cap. This applies for up to 8 assessment years and covers only interest, not principal repayment. Parents repaying a child’s education loan can claim this deduction too.

Section 133: Charitable Donations

Donations to registered organizations reduce your taxable income, up to 50% or 100% of the donation amount, depending on the institution. Donations to the Prime Minister’s National Relief Fund qualify for a 100% deduction. Most NGOs and charitable trusts qualify for a 50% deduction.

Section 153: Interest on Savings Account

Banks pay interest on savings accounts, and most people do not know that up to ₹10,000 of that interest is tax-free under Section 153 (for those below 60). Senior citizens get a much better deal under Section 153, which is a ₹50,000 exemption on interest from savings accounts, fixed deposits, and post office deposits combined.

Tax-saving Options Under the New Tax Regime

The new tax regime has fewer deductions, but the ones it has are significant. Here are the tax-saving options under the new tax regime:

Standard Deduction of ₹75,000

Every salaried person under the new regime gets ₹75,000 reduced from their gross income before tax is calculated. There are no investments needed, no receipts to submit, no declarations. The old regime’s standard deduction is ₹50,000; that ₹25,000 difference is one of several ways Budget 2025 pushed salaried employees toward the new system.

Section 124

This is the new regime’s most powerful deduction, and it is available only if your employer contributes to your NPS. The limit here is 14% of basic salary, compared to just 10% under the old regime.

Home Loan Interest on Let-out Property

If you own a property and it is rented out rather than self-occupied, the full interest on your home loan is deductible under the new regime too. The ₹2 lakhs ceiling does not apply here; that cap only exists for self-occupied properties under the old regime.

Gratuity, Leave Encashment, and Retirement Benefits

These are not investment decisions, but they are real money, and both regimes treat them the same.

• Gratuity: Tax-free up to ₹20 lakhs for private sector employees.
• Leave Encashment: Fully exempt for government employees on retirement; ₹25 lakhs cap for private sector.
• VRS Compensation: Up to ₹5 lakhs is tax-free.

Tax Planning Calendar for Salaried Employees

Most people think about tax in February or March. That is too late for most of the decisions that actually matter. Here is the tax planning that you can do to plan your strategies:

April: The Month Everything Gets Set

This is the most important month of the financial year for tax planning. Here is what you need to do:

• Choose Your Regime: Compare your expected deductions for the year. Decide in the first week of April, not December.
• Inform Your Employer: Submit your regime preference. Most companies have an online portal or ask your HR for the declaration form.
• Request CTC Restructuring: Ask about employer NPS contribution and FBP components now because changing it mid-year is harder and sometimes impossible.
• Start Your ELSS SIP: If you are on the old regime and using ELSS for Section 123, start the SIP in April.

May–July: ITR Filing and Investment Declarations

• Submit Form 12BB to Your Employer: It is the investment declaration form. You can declare HRA, LTA, 123 investments, 126 premiums exemptions, and home loan details in this form.
• File your ITR for the Previous Year: The deadline for filing ITR is July 31 for salaried employees.
• Check Form 26AS and AIS on the Income Tax Portal: These forms show every TDS deduction and income reported against your PAN. Errors here cause return mismatches.

August–November: Mid-Year Check

• Review Your Payslip: Check if TDS is being deducted correctly based on your declaration.
• Update Your Investment Declaration: If you have started new investments or stopped old ones, update them.
• Check if you Have Hit Your Section 123 Limit: If EPF contributions are already ₹1 lakh for the year, you only have ₹50,000 left, so you should not over-invest elsewhere.

December–February: Employer Proof Submission Season

January is usually when employers ask for actual investment proof and not just declarations. Have the following documents ready:

• Section 123: PPF passbook, ELSS account statement, premium receipt, home loan account statement.
• Section 126: Health insurance premium certificate.
• HRA: Rent receipts for all 12 months, rent agreement, landlord’s PAN if rent exceeds ₹1 lakh/year.
• Section 124: NPS account statement showing your voluntary contributions.

March 31: The Deadline

Everything must happen on or before March 31. Here is the checklist for what you need to do before the deadline:

• PPF top-up for the year done (minimum ₹500 to keep the account active).
• ELSS investment for the year completed (SIP or lump sum).
• NPS voluntary contribution of ₹50,000 invested under 124.
• Health insurance premium paid for all policies under 126.
• Charitable donations made via online transfer under 133.
• LTCG booked up to ₹1.25 lakh threshold and reinvested.
• Gifts to parents made and invested in their names.
• Advance tax 4th installment paid (100% of estimated liability by March 15).

Conclusion

For filing and saving tax, you do not need a complicated system. You just need a system where you can actually understand what your liabilities are and how you can save your hard-earned money from going into heavy taxes. You should start the financial year by comparing both regimes using your expected salary, rent, insurance, NPS, and loan details. Then review the plan mid-year. Check whether your deductions are actually happening, whether your declarations are accurate, and whether your salary structure is working in your favor. Finally, before the year closes, make sure your documents line up with your claims. By following this little routine checkup, you can actually save taxes if you earn above 10 lakhs.

FAQs on How to Save Tax for Salary Above 10 Lakhs?