Buy a Life Insurance Plan in a few clicks
Create wealth through bonus payout from 1st policy year
A plan that offer guaranteed returns and financial protection for your family.
Kotak Guaranteed Fortune Builder
A plan that offers guaranteed income for your future goals.
Thank you
Our representative will get in touch with you at the earliest.
Pay 10,000/month for 10 years, Get 1,65,805/Year* for next 15 years.
ARN. No. KLI/23-24/E-BB/1201
Features
Ref. No. KLI/22-23/E-BB/999
Earning a salary above 20 lakhs per year definitely sounds exciting, but when tax season comes around, that excitement can quickly turn into confusion. You might find yourself wondering how to save tax for salary above 20 lakhs without getting tangled in complex rules. To clarify these doubts, this blog will walk you through the current tax slabs, compare both new and old tax regimes, and break down smart and simple ways to reduce your tax burden. Keep reading!
The Union Budget 2025 brought some key changes to make taxes simpler and more friendly for salaried people. Starting April 1, 2025, the new tax regime has higher exemption limits and updated slab rates.
Annual Income (₹) | Tax Rate |
---|---|
Up to ₹4,00,000 | 0% |
₹4,00,001 - ₹8,00,000 | 5% |
₹8,00,001 - ₹12,00,000 | 10% |
₹12,00,001 - ₹16,00,000 | 15% |
₹16,00,001 - ₹20,00,000 | 20% |
₹20,00,001 - ₹24,00,000 | 25% |
Above ₹24,00,000 | 30% |
The best part about the update is that the basic exemption limit is now ₹4 lakh, and the rebate under Section 87A has increased to ₹60,000. If your income is up to ₹12 lakh, you will have zero tax liability under this regime. Plus, salaried individuals now get a ₹75,000 standard deduction, making income up to ₹12.75 lakh completely tax-free. These changes are made to leave more money in your hands and support savings and spending.
With the updated income tax slabs in Budget 2025, it has become even more crucial for you to pick the right tax regime. However, your choice will depend on your income, tax-saving investments, and how your salary is structured.
The new tax regime is best suited for those who do not want to deal with multiple deductions and exemptions. But even under this regime, there are still a few saving options for income tax on 20 lakhs salary. Here is a quick list:
Other deductions include:
While the options may be fewer compared to the old regime, they can still help reduce your taxable income smartly if used correctly.
Section | What It Covers | Tax Benefit You Get |
---|---|---|
Section 80C | Investments like PPF, EPF, ELSS, NSC, SSY, 5-year FD, life insurance, home loan principal | Up to ₹1.5 lakh deduction |
Section 80D | Health insurance premium for self, family, and parents | ₹25,000 (below 60), ₹50,000 (above 60), extra for parents |
Section 80E | Interest paid on the education loan | Full interest deduction up to 8 years |
Section 80G | Donations to approved charities or institutions | 50% or 100% of the donated amount |
Section 80DD | Expenses for disabled dependents | ₹75,000 (40% disability), ₹1.25 lakh (80% or more) |
Section 24(b) | Interest paid on home loan | Up to ₹2 lakh per year |
Life Insurance Maturity | Maturity proceeds of life insurance policies | Tax-free if the sum assured is 10%, 15%, or 20% of the premium, depending on the issue date |
House Rent Allowance (HRA) | If you pay rent and receive HRA | Exemption based on rent paid, salary, and city category |
Tax calculation is based on the income slabs defined by the Indian government. Both old and new regimes have different slab rates and here is how they compare for FY 2024-25 (AY 2025-26):
Annual Income | Old Tax Regime | New Tax Regime |
---|---|---|
Up to ₹2.5 lakh | NIL | NIL |
₹2.5 lakh - ₹5 lakh | 5% | 5% |
₹5 lakh - ₹7.5 lakh | 20% | 10% |
₹7.5 lakh - ₹10 lakh | 20% | 15% |
₹10 lakh - ₹12.5 lakh | 30% | 20% |
₹12.5 lakh - ₹15 lakh | 30% | 25% |
Above ₹15 lakh | 30% | 30% |
Here is how you can save tax on your salary if you pay above 20 lakh income tax:
Section 80C of the Income Tax Act provides for a tax deduction of up to ₹1.5 lakhs on eligible tax-saving investments and expenses. Some of the most common tax saving investments under this section include Public Provident Fund (PPF), Employee Provident Fund (EPF), National Savings Certificate (NSC), and Equity Linked Savings Scheme (ELSS).
By investing in a health insurance policy, individuals can avail of a tax deduction of up to ₹25,000 under >Section 80D. Additionally, if the individual is above 60 years of age, the tax deduction limit increases to ₹50,000.
If you own a second property, you can earn a rental income. The rental income is taxable, but you can avail of a tax deduction for the interest paid on the home loan under Section 24. The tax deduction limit is up to ₹2 lakhs.
If you are living on rent, you can avail of the House Rent Allowance (HRA) exemption. HRA is a component of your salary and is exempt from tax, provided you are living on rent and the rent paid is more than 10% of your basic salary.
The National Pension Scheme (NPS) is a tax-efficient investment option for that earning above ₹20 lakhs. Tax-saving investments made in NPS are eligible for a tax deduction of up to ₹1.5 lakhs under Section 80CCD (1B).
If you have taken an education loan for yourself or your dependents, you can avail of a tax deduction of up to ₹1.5 lakhs under Section 80E. The tax deduction is available for a maximum period of 8 years.
Leave Travel Allowance (LTA) is an allowance provided by the employer to an employee for travel expenses incurred while on leave. LTA is exempt from tax, and individuals can claim this exemption twice in a block of 4 financial years.
Donations made to registered charitable institutions are eligible for tax deductions under Section 80G of the Income Tax Act. This includes donations made to political parties and religious organizations.
Expenditure incurred towards professional development can be claimed as a tax deduction under section 80C. This includes courses and training programs related to one’s line of work.
Let us break it down in a simple way so you can clearly see which tax regime is better for 20 lakhs salary.
Particulars | Old Regime (₹) | New Regime (₹) |
---|---|---|
Gross Salary | 20,00,000 | 20,00,000 |
Standard Deduction | 50,000 | 50,000 |
Net Salary After Deduction | 19,50,000 | 19,50,000 |
Section 80C | 1,50,000 | NA |
Section 80D | 50,000 | NA |
Section 24(b) | 2,00,000 | NA |
Section 80CCD(1B) | 50,000 | NA |
Total Deductions | 5,00,000 | 0 |
Net Taxable Income | 14,50,000 | 19,50,000 |
Income Slab | Old Regime Tax (₹) | New Regime Tax (₹) |
---|---|---|
Up to ₹2.5 lakh | NIL | NIL |
₹2.5 - ₹5 lakh | 12,500 | 12,500 |
₹5 - ₹7.5 lakh | 25,000 | 25,000 |
₹7.5 - ₹10 lakh | 50,000 | 50,000 |
₹10 - ₹12.5 lakh | 75,000 | 62,500 |
₹12.5 - ₹15 lakh | 75,000 | 75,000 |
₹15 - ₹19.5 lakh | 0 | 1,35,000 |
Total Tax Payable | 2,37,500 | 3,60,000 |
Add: 4% Cess | 9,500 | 14,400 |
Total Tax Liability | 2,47,000 | 3,74,400 |
Here, you can see that by using all the available deductions under the old regime, your total tax liability turns out to be lower than the new regime, even though the new regime has reduced slab rates.
Individuals earning a salary above ₹20 lakhs can make the most of these tax-saving options to reduce their tax liability. However, it is important to note that the tax laws are subject to change, and it is advisable to consult a tax expert to ensure that you are availing of the tax benefits in a compliant manner.
1
If your salary is above ₹20 lakhs, you can save taxes using options like Section 80C (investments in ELSS, PPF, life insurance), Section 80D (health insurance), NPS, HRA exemption, home loan interest, and donations.
2
It depends on how much you invest or spend on eligible deductions. If you claim deductions like 80C, 80D, HRA, or home loan interest, the old regime may help you save more. But if you do not want to track these deductions, the new regime offers lower tax rates and is simpler.
3
Under Section 80C, you can claim a maximum deduction of ₹1.5 lakhs, even if your salary is over ₹20 lakhs. You can invest in ELSS funds, PPF, LIC, 5-year FD, or repay a home loan to claim this.
4
Yes, you can claim House Rent Allowance (HRA) exemption under the old tax regime if you live in rented accommodation and your salary structure includes HRA. The exemption depends on your rent paid, salary, and city of residence.
5
Yes, ELSS (Equity Linked Savings Scheme) mutual funds are a great tax-saving option under Section 80C. They offer higher return potential with a shorter 3-year lock-in period. It is ideal for high-income earners looking to save tax and grow wealth over time.
Pay 10,000/month for 10 years, Get 1,65,805/Year* for next 15 years.
ARN. No. KLI/23-24/E-BB/1201
Features
Ref. No. KLI/22-23/E-BB/999
The information herein is meant only for general reading purposes and the views being expressed only constitute opinions and therefore cannot be considered as guidelines, recommendations or as a professional guide for the readers. The content has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable. Recipients of this information are advised to rely on their own analysis, interpretations & investigations. Readers are also advised to seek independent professional advice in order to arrive at an informed investment decision. Further customer is the advised to go through the sales brochure before conducting any sale. Above illustrations are only for understanding, it is not directly or indirectly related to the performance of any product or plans of Kotak Life.
Start saving today and enjoy guaranteed returns with our Savings Plans!