Effective Ways to Save Tax on a 15 Lakh Annual Income
Riya is a software specialist of 30 who resides in the city of Delhi. She has a grand earning of about ₹15 lakh per year. One day, she realized that part of her earnings goes in paying taxes and there is less money left aside for savings and expenses.
Pay less, manage better—consolidate now!
Determined to change that, she learned about the methods of getting tax-saving strategies, which would help her reduce her taxable income. By the end of the year, Riya successfully saved almost ₹2 lakh in taxes! Let’s explore the steps she followed, so you can save too.
Understanding the Tax Regimes
Choose between the two tax regimes, Old tax regime, which allows claiming deductions and exemptions concerning investments and expenses or those people who possess several investments for tax savings gain.
Old Tax Regime: Allow claim deductions and exemptions including investments and expenses ideal for those who have several tax-saving investments.
New Tax Regime: Low tax rates along with most deductions and exemptions gone.
For example, Riya had investments in instruments like the Public Provident Fund (PPF) and health insurance. The old tax regime suited her better, as she could claim multiple deductions.
How Deductions Help Reduce Taxes
Under the old tax regime, you can utilize specific sections of the Income Tax Act to lower your taxable income. Here’s how Riya did it:
1. Section 80C: Investment Deductions
Riya invested ₹1.5 lakh under Section 80C, which offers deductions for:
PPF: A long-term savings scheme with tax-free returns.
Equity-Linked Savings Scheme (ELSS): Mutual funds offering tax-saving benefits.
Life Insurance Premiums: Protects your family while saving tax.
Example:
If Riya’s annual income is ₹15 lakh, her taxable income reduces to ₹13.5 lakh after investing ₹1.5 lakh under Section 80C.
2. Standard Deduction
Every salaried employee in India can claim a standard deduction of ₹50,000. This directly lowers the taxable salary.
Before Deduction: Taxable income = ₹13.5 lakh (after 80C).
After Standard Deduction: Taxable income = ₹13 lakh.
3. Home Loan Benefits (Section 24)
If you have a home loan, you can:
Claim up to ₹2 lakh on interest repayment under Section 24(b).
Include the principal repayment under Section 80C.
Example:
Riya pays ₹1.8 lakh annually as home loan interest. She claims the full deduction of ₹2 lakh, reducing her taxable income further to ₹11 lakh.
Tax-Saving Table: Riya’s Journey
| Step | Deduction Claimed (₹) | Taxable Income (₹) |
|---|---|---|
| Starting Income | - | 15,00,000 |
| Section 80C Investments | 1,50,000 | 13,50,000 |
| Standard Deduction | 50,000 | 13,00,000 |
| Home Loan Interest (80C+24) | 2,00,000 | 11,00,000 |
4. House Rent Allowance (HRA)
Riya rented an apartment in Delhi and paid ₹20,000 per month. The HRA exemption allowed her to claim part of this as tax-free:
Actual HRA received = ₹60,000 annually.
Rent paid – 10% of salary = ₹1,80,000 – ₹1,50,000 = ₹30,000.
50% of salary (for metro cities like Delhi) = ₹7,50,000.
The least of the above (₹30,000) was exempted, further reducing her taxable income.
5. Health Insurance (Section 80D)
Riya purchased health insurance for herself and her parents. This qualified her for deductions:
₹25,000 for her own policy.
₹50,000 for her senior citizen parents’ policy.
Total deduction = ₹75,000. This brought her taxable income down to ₹10.25 lakh.
National Pension Scheme (NPS)
Under Section 80CCD(1B), an additional ₹50,000 can be claimed by investing in NPS. Riya contributed to the NPS to save even more.
Before NPS: Taxable income = ₹10.25 lakh.
After NPS: Taxable income = ₹9.75 lakh.
Conclusion: Smart Planning for Big Savings
deductions applied under 80C, 24(b), 80D, and 80CCD(1B), Riya was able to reduce her taxable income from ₹15 lakhs to ₹9.75 lakhs-an over ₹200000 save on taxes! Effective tax planning is not only compliance but ensuring you keep more or even all of your hard-earned money while securing your future.
Start early, make wise investments and maximize your savings. Be it a personal loan in Delhi or strategizing for investments, knowing these things will cut costs considerably.
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