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How Can I Save Tax If I Earn 20 Lakhs?

All people who meet the requirements for the applicable income tax band set by the Indian government must comply with the income tax provision. The income tax bracket begins at Rs 5 lakh for people with yearly income. Even in the qualified income tax bracket, several provisions and deductions can be taken advantage of to reduce taxes.

Even though the income exceeds the Rs 20 lakh threshold, which is regarded as a high-income bracket, this CTC also attracts greater tax than the lower bracket. So, how can you save on tax?

Here are 5 exemptions that you should use to save taxes:


The company typically offers House Rent Allowance (HRA) to cover the rent if you live in rented housing. The entire HRA is not exempt, though. The bare minimum of the following is exempt:

  • Real HRA was given.
  • 40% of the wage (50 percent in the case of the metro city)
  • Rent paid less than ten percent of wages

Tip: Even if you live in a home owned by your parents, you can pay rent to them and avoid paying taxes as long as all of your transactions are legitimate, performed using methods other than cash, and your income is included in your parents’ income.


If you incur any costs while doing your official duties, your company may sometimes pay you. Upon submission of actual invoices, these refunds may be deducted from income. Mobile reimbursements, books and periodicals, clothes, and research allowances are a few examples.


The Section 80C deduction is the one that most Indian taxpayers take advantage of. This is because investments in various beneficial instruments are eligible for deductions under Section 80C up to a maximum of Rs. 1.5 lakh.

These include government-managed provident funds, such as the Employee Provident Fund (EPF) and Public Provident Fund, to save for the future after employment (PPF). They also include market-linked investment alternatives like Unit Linked Insurance Plans and Equity Linked Savings Schemes (ELSS) (ULIP).

By investing in a specific category of fixed deposits called Tax Saving Fixed Deposits, which help you reduce your taxable income, you could also take advantage of Section 80C deductions.

Standard Deduction

With the transit allowance and medical reimbursement, a basic deduction of Rs 50,000 is permitted beginning with the financial year 2019–20. Whatever the actual cost incurred, this deduction is allowed. 

Section 80C

The most popular portion, Section 80C, is one that most individuals are aware of and use up to Rs 1.5 lakh to their advantage. But aside from PPF, NSC, principal repayment on a housing loan, ELLS mutual funds, five-year tax-saving FDs, ULIPs, insurance premiums, and many other deductions covered under this Section, people frequently overlook them. Examples include stamp duty value paid on the purchase of property, tuition fees for up to two children, and tuition fees for other than PPF, NSC, and PPF.

Bottom Line

As a taxpayer earning Rs 20 lakhs, you have various tax-saving choices at your disposal. Finding the strategies and deductions that work with your overall priorities and identifying your financial goals are the only things left to do.

However, term insurance should ideally be on the agenda of every individual who wants to save money on taxes.

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