What is Tax Evasion? Meaning, Methods & Penalties

Income Tax Slab Rates for New Tax Regime Applicable for FY 2025-2026

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.

Revised Income Tax Slabs (FY 2025–26)

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.

How to Choose Between New and Old Tax Regime?

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.

A. When to Choose the New Tax Regime

• Income up to ₹12 lakh: You can get a full tax rebate under Section 87A, so your tax could be zero.
• Fewer Deductions: If you do not invest much in 80C, do not pay rent, or do not have a home loan, the new regime’s lower tax rates can work better for you.
• Hassle-Free Filing:It is great if you want a simple tax process without tracking too many documents or exemptions.

B. When to Stick with the Old Tax Regime

• High Deductions:If you claim deductions like 80C, 80D, HRA, home loan interest, etc., and the total amounts to ₹5 lakh or more, the old regime might save you more.
• Flexible Salary Structure: If your salary includes tax-free perks like HRA, LTA, and other allowances, the old regime is likely a better fit.

Tax Saving Options Above ₹20 Lakhs Salary - New Tax Regime

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:

• Standard Deduction of ₹50,000 for salaried individuals
• Section 80CCD(2) - Employer’s contribution to NPS (up to 10% of basic salary)
• Section 80CCH - Investment in Agniveer Corpus Fund
• Section 57(iia) - Deduction for family pension
• Section 10(10C) - Amount received from voluntary retirement
• Section 10(10) - Gratuity received
• Section 10(10AA) - Leave encashment

Other deductions include:

• Section 24 - Interest on home loan (only on let-out property)
• Transport allowance for specially-abled employees
• Conveyance allowance for travel expenses related to work

While the options may be fewer compared to the old regime, they can still help reduce your taxable income smartly if used correctly.

Tax Saving Options Above ₹20 Lakhs Salary - Old Tax Regime

Tax Calculation Under the New and Old Regimes

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):

How to Save Tax on Salary Above 20 Lakhs?

Here is how you can save tax on your salary if you pay above 20 lakh income tax:

Make the Most of Section 80C

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).

Invest in a Health Insurance Policy

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.

Rent Out Your House Property

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.

Use the HRA Exemption

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.

Invest in National Pension Scheme (NPS)

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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).

Claim Tax Deductions on Education Loans

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.

Make Use of the LTA Exemption

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.

Use the Deduction for Donations

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.

Claim Tax Deduction for Professional Development

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.

Which Regime is Better for 20 Lakh LPA to Save Tax?

Let us break it down in a simple way so you can clearly see which tax regime is better for 20 lakhs salary.

Step 1: Compare Taxable Income After Deductions

Step 2: Compare Tax Payable

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.

Wrapping Up

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.

FAQs on How to Save Tax for Salary Above 20 Lakhs?