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10 Tips On How To Save Tax On Salary

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10 Tips On How To Save Tax On Salary

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If you are a salaried employee, you may have no doubt wondered about how to save tax on salary in India. Typically, if you are earning ₹10 lakhs or less, you can bring your tax liability down to zero. Here’s an overview of how you can do this.



Total income before deductions


Less: Standard deduction


Less: Deductions for eligible investments and expenses u/s 80C


Less: Deduction for NPS investment u/s 80CCD(1b)


Less: Deductions for home loan EMI interest u/s 24b


Less: Deductions for health insurance premium for self/family u/s 80D


Less: Deductions for health insurance premium for dependent senior citizen parent u/s 80D


Total income after deductions


Under section 87A of the Income Tax Act, 1961, income below ₹5 lahks is eligible for a rebate, so you need not pay any taxes if your income does not exceed this limit. 

That said, your income will no doubt grow over time, thanks to salary increments. So, if you want to know how to save tax for a salary above ₹10 lakhs, the tips outlined below can help. 

1. Claim HRA Exemption

If you receive House Rent Allowance (as more salaried people do), you can claim a partial exemption if you live in a rented house. The exemption is the least of the following amounts: 

  • Actual HRA received 
  • Actual house rent paid minus 10% of your salary
  • 50% of your salary if you live in a metro city 
  • 40% of your salary if you live in a non-metro city

2. Claim LTA Exemption

You may also receive Leave Travel Allowance as a part of your salary. If you do, you can claim exemptions on any domestic travel you undertake either alone or with your family. The LTA is exempt partially, based on the mode of transport you choose, as outlined below:

  • If you travel by air:

The air fare for the economy class charged by the national carrier along the shortest route connecting your origin point to your destination is exempt.

  • If you travel by railways (or if you use any other mode of transport, but your origin and destination are connected by railways):

The rail fare for the air-conditioned first class section along the shortest route connecting your origin point to your destination is exempt. 

  • If the origin point and the destination are not connected by rail, but are connected by any other recognized mode of public transport:

The fare for the first class or deluxe class section along the shortest route to the destination by the mode of public transport is exempt.

3. Meal Coupons

If your workplace offers you Sodexo meal coupons or any other meal passes, you can claim an exemption of ₹50 per meal. 

4. Mobile/Internet Bills 

Some employers may compensate their employees for the mobile phone charges and internet expenses incurred. If you receive these allowances, you can claim an exemption that is equal to the least of the following:

  • Actual amount of compensation received
  • Actual amount spent on these expense heads

5. Standard Deduction

Standard deduction means a flat deduction available for individuals earning only a salary or pension income. If you fall in this category, you can claim a flat standard dedication of ₹50,000 per financial year. 

6. EPF Contributions 

Your EPF contribution qualifies for a tax deduction too. The employee contribution is tax-free up to ₹1.5 lakh u/s 80C of the Income Tax Act, 1961. So, if you contribute to your EPF account, make sure you claim this amount as a deduction to lower your taxable income. 

7. Full Use of Section 80C

In addition to the EPF contribution, several other investments and expenses also qualify for deduction u/s 80C of the Income Tax Act, 1961. You can make use of these provisions to bring the total deduction amount up to ₹1.5 lakhs if possible. Here are some of the investments and expenses that you can claim u/s 80C. 

  • Life insurance premium paid
  • Deposit in provident fund/superannuation fund
  • Investment in tax-saver fixed deposit
  • Investment in NSC
  • Tuition fee for two children
  • Repayment of home loan (principal component only)
  • Investment in Equity Linked Savings Scheme (ELSS)

8. Home Loans  

Your home loan can help you save more than just ₹1.5 lakh u/s 80C. The interest component of your home loan repayments also qualifies for tax deduction u/s 24b, to the extent outlined below.

  • ₹2 lakh for self-occupied property 
  • No limit for a let-out property

9. Health Insurance Premiums 

If you have exhausted your tax deduction limit u/s 80C, you can claim further tax deductions under other sections of the Income Tax Act, like section 80D. Here, the premium paid towards health insurance is eligible for tax deduction, to the limits as shown below. 

Health insurance policy taken for

Whether the policyholder is a senior citizen

Maximum amount of premium eligible for deduction u/s 80D

Self, spouse or kids



Self, spouse or kids



Dependent parent



Dependent parent



10. The Right Tax Regime

Lastly, another often overlooked tip on how to reduce tax on salary is that you need to choose the right tax regime. If you have maximized your deductions, the old tax regime may be a better choice. This is because although the tax rates are higher here, the deductions and exemptions available are also plenty.

On the other hand, if you do not have many deductions/exemptions to claim, the new tax regime may be better since it offers lower tax rates.


The tips outlined above should give you a better idea of how to save income tax on salary. You can make use of whichever strategies are applicable to you.

And in case you find there are other deductions and provisions that you can take advantage of, it is never too late to plan your investments and expenses in such a way that you can optimize your tax savings to the fullest.

Frequently Asked Questions

1. Can I save 100% tax?

Technically, you can save 100% tax as long as your income is ₹10 lakh or lower. This is because you can take advantage of the various deductions and provisions of the Income Tax Act, 1961, like the standard deduction, deductions u/s 80C and 80D, home loan interest deductions and other such provisions. 

2. How can I save tax over 10 lakhs?

If you earn over ₹10 lakhs during the year, you may not be able to save 100% tax. However, you can still optimize your tax savings with the help of various provisions like deductions under section 80C, 80D and other sections in chapter VI A of the Income Tax Act, 1961. 

You can also make use of the standard deduction of ₹50,000 to reduce your taxable income and thereby, your tax liability further. 

3. How much tax can I save on my salary?

You can save tax on your salary by using various provisions of the Income Tax Act, 1961, like tax deductions and tax exemptions. Several components of your salary like the House Rent Allowance (HRA) and conveyance allowance are partially exempt from tax.

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