Are you looking for ways to save tax on your salary in India? If so, you're in the right place. In this blog post, we'll discuss the various taxes that apply to salary income in India and provide some tips on how to save tax. So, let's get started!
 

Tax on Salary in India

In India, tax on salary is levied on individuals who earn income from salaries, wages, commissions, bonuses, tips, gratuities, and other similar forms of remuneration. The tax is deducted at source by the employer and paid to the government. The individual pays tax on the balance income after deducting the taxes paid at source.
 

How is Tax on Salary Computed in India

The tax on salary is computed based on the individual's taxable income and tax slab rate applicable for that financial year. The taxable income is calculated after making certain deductions such as standard deduction, housing loan interest deduction, deduction for investments made under section 80C of the Income Tax Act, 1961, etc. The tax slab rates for FY 2021-22 (AY 2022-23) are as follows:
 
For individuals below 60 years of age:
  • Up to INR 2.5 lakhs - NIL
  • INR 2,50,001 to 5 lakhs - 5%
  • INR 5,00,001 to 10 lakhs - 20%
  • Above INR 10 lakhs - 30%
 
For senior citizens (60 years or above but less than 80 years):
  • Up to INR 3 lakhs - NIL
  • INR 3,00,001 to 5 lakhs - 5%
  • INR 5,00,001 to 10 lakhs - 20%
  • Above INR 10 lakhs - 30%
  •  
For super senior citizens (80 years or above):
  • Up to INR 5 lakhs - NIL
  • INR 5,00 001 to 10 lakhs - 20%
  • Above INR 10 lakhs 30%
The tax on salary is computed after applying the relevant tax slab rate to the taxable income. For example, if an individual's taxable income is INR 5 lakhs and he/she falls in the 5% tax slab, then his/her tax liability will be 5% of INR 2.5 lakhs (5,00,000-2,50,000), i.e., INR 12,500 but he/she can avail the standard rebate of Rs. 12,500 u/s 87Aof of Income Tax Act, So the Tax Liability will be Nil.    
 

How to Save Tax on Salary in India

There are several ways in which an individual can save tax on salary in India. Some of the common methods are:
 
Invest in Tax-Saving Instruments
If you want to save tax on salary in India, one of the best ways to do so is by investing in tax-saving instruments. Some of the most popular options include Public Provident Fund (PPF), Equity-Linked Saving Scheme (ELSS), National Savings Certificate (NSC), and Sukanya Samriddhi Yojana (SSY).
These instruments not only help you save tax but also offer other benefits such as building a corpus for future goals, earning higher returns, etc. When choosing a tax-saving instrument, it is important to compare the different options and select one that best suits your needs and requirements.
 
Optimize Your Tax Deductions
Another way to save tax on salary in India is by optimizing your deductions. Under Section 80C of the Income Tax Act, 1961, taxpayers can claim deductions of up to Rs 1.5 lakh per annum on certain investments and expenses such as PPF, ELSS, NSC, SSY, life insurance premiums, tuition fees paid for children’s education, etc.
Similarly, under Section 80D of the Income Tax Act, 1961, taxpayers can claim deductions on premium payments made towards health insurance policies for themselves, their spouses, and dependent children. Thus, by making smart investment choices and taking advantage of all the available deductions, you can significantly reduce your taxable income and save a significant amount of money in taxes.
 
Use the Right Tax Planning Strategies
Last but not least, another effective way to save tax on salary in India is by using the right tax planning strategies. This includes timing your investments wisely so that they qualify for maximum deduction under the Income Tax Act and selecting investment instruments that offer lower taxation rates. For instance, long-term capital gains from equity mutual funds are taxed at just 10% if held for more than 12 months while short-term capital gains from debt mutual funds are taxed at your marginal rate which could be as high as 30%. Similarly, dividends from equity mutual funds are also taxed at lower rates as compared to interest income from fixed deposits or debt mutual funds.
Thus, by using the right tax planning strategies, you can further reduce your taxable income and save a good amount of money in taxes every year.
 
The best way to save tax on salary in India is by investing in tax-saving instruments, optimizing your tax deductions, and using the right tax planning strategies. By doing this, you can lower your taxable income and ultimately pay less tax. So, start saving today and enjoy the benefits of lower taxes tomorrow!