Who This Scenario Is For
A 20 LPA salary represents a strong senior professional or managerial income in India — typical for senior software engineers with 8-12 years of experience, engineering managers, architects, senior product managers, senior consultants, or leadership roles in top tech companies, consulting firms, and multinational corporations.
At this income level, tax optimization becomes crucial. With strategic planning across deductions and investments, you can save ₹60,000 to ₹1,00,000 annually in taxes. The choice between old and new regime significantly impacts your financial planning and wealth building strategy.
This scenario shows you exactly how much tax you'll pay under both regimes, what your take-home salary will be, and how to make the optimal choice based on your financial situation.
Old vs New Regime - Quick Comparison
| Parameter | Old Regime (With Deductions) | New Regime (No Deductions) |
|---|---|---|
| Gross Salary | ₹20,00,000 | ₹20,00,000 |
| Standard Deduction | -₹50,000 | -₹50,000 |
| 80C Deductions (PF + ELSS/PPF) | -₹1,50,000 | ₹0 |
| HRA Exemption | -₹2,00,000 | ₹0 |
| Taxable Income | ₹16,00,000 | ₹19,50,000 |
| Income Tax | ₹2,64,200 | ₹2,20,400 |
| Tax Difference | New Regime Saves ₹43,800 per year (with basic deductions only) | |
Important: With only basic deductions (80C + HRA), new regime is better by ₹43,800. However, with additional deductions like home loan interest (₹2L), NPS (₹50K), and 80D (₹50-75K), old regime becomes significantly better. See detailed comparison below.
Old Tax Regime - Detailed Calculation
Income & Deductions (Basic Scenario)
| Gross Annual Salary | ₹20,00,000 |
| Less: Standard Deduction | -₹50,000 |
| Income After Standard Deduction | ₹19,50,000 |
| Less: 80C (PF ₹21,600 + ELSS/PPF ₹1,28,400) | -₹1,50,000 |
| Less: HRA Exemption (Rent ₹30,000/month) | -₹2,00,000 |
| Taxable Income | ₹16,00,000 |
Tax Calculation
| Income Slab | Tax Rate | Taxable Amount | Tax |
|---|---|---|---|
| Up to ₹2.5 lakh | Nil | ₹2,50,000 | ₹0 |
| ₹2.5L - ₹5L | 5% | ₹2,50,000 | ₹12,500 |
| ₹5L - ₹10L | 20% | ₹5,00,000 | ₹1,00,000 |
| Above ₹10L | 30% | ₹6,00,000 | ₹1,80,000 |
| Total Tax | ₹2,92,500 | ||
| Add: 4% Cess | ₹11,700 | ||
| Total Tax Liability (Old Regime) | ₹3,04,200 | ||
With Additional Deductions (Optimized Scenario)
If you add home loan interest (₹2L), NPS 80CCD(1B) (₹50K), and 80D health insurance (₹50K for self + parents), your taxable income drops to ₹13 lakh, reducing tax to approximately ₹1,92,400. This saves you ₹1,11,800 compared to basic old regime and ₹28,000 compared to new regime — making old regime the clear winner.
New Tax Regime - Detailed Calculation
Income & Deductions
| Gross Annual Salary | ₹20,00,000 |
| Less: Standard Deduction | -₹50,000 |
| Taxable Income (No other deductions allowed) | ₹19,50,000 |
Tax Calculation
| Income Slab | Tax Rate | Taxable Amount | Tax |
|---|---|---|---|
| Up to ₹3 lakh | Nil | ₹3,00,000 | ₹0 |
| ₹3L - ₹7L | 5% | ₹4,00,000 | ₹20,000 |
| ₹7L - ₹10L | 10% | ₹3,00,000 | ₹30,000 |
| ₹10L - ₹12L | 15% | ₹2,00,000 | ₹30,000 |
| ₹12L - ₹15L | 20% | ₹3,00,000 | ₹60,000 |
| Above ₹15L | 30% | ₹4,50,000 | ₹1,35,000 |
| Total Tax | ₹2,75,000 | ||
| Add: 4% Cess | ₹11,000 | ||
| Total Tax Liability (New Regime) | ₹2,86,000 | ||
Monthly Take-Home Salary Comparison
| Component | Old Regime (Basic) | New Regime | Old Regime (Optimized) |
|---|---|---|---|
| Monthly Gross Salary | ₹1,66,667 | ₹1,66,667 | ₹1,66,667 |
| Less: PF (Employee) | -₹1,800 | -₹1,800 | -₹1,800 |
| Less: Professional Tax | -₹200 | -₹200 | -₹200 |
| Less: Income Tax (Monthly) | -₹25,350 | -₹23,833 | -₹16,033 |
| Monthly In-Hand Salary | ₹1,39,317 | ₹1,40,834 | ₹1,48,634 |
| Annual Take-Home | ₹16,71,804 | ₹16,90,008 | ₹17,83,608 |
Best Option: Old regime with optimized deductions (home loan + NPS + health insurance) gives you ₹1,48,634 monthly in-hand — ₹7,800 more than new regime and ₹9,317 more than basic old regime. Annual savings of ₹93,600 vs new regime!
Understanding the Comparison
Which Regime Should You Choose?
Choose New Regime If:
- You have no HRA exemption (live with parents or own home without loan)
- You don't have a home loan
- You don't want to invest in 80C/NPS instruments
- You prefer simplicity and don't want to manage multiple deductions
- Your total deductions are less than ₹3.5 lakh (basic 80C + HRA)
Tax savings with new regime: ₹18,200 annually compared to basic old regime (approximate, varies by exact deductions).
Choose Old Regime If:
- You have home loan — interest deduction up to ₹2 lakh saves ₹60,000 in tax
- You pay high rent (₹30,000+) and can claim substantial HRA exemption
- You invest in NPS (additional ₹50K under 80CCD(1B))
- You pay health insurance for self and parents (₹50-75K under 80D)
- You have education loan (interest fully deductible under 80E)
- Your total deductions exceed ₹4 lakh
Tax savings with optimized old regime: ₹93,600 annually compared to new regime — that's ₹7,800/month extra in your pocket!
Key Deductions to Maximize at 20 LPA
| Deduction | Limit | Tax Saving (at 30% slab) |
|---|---|---|
| 80C (PF + ELSS + PPF + LIC) | ₹1,50,000 | ₹45,000 |
| HRA Exemption | ₹2,00,000+ (approx) | ₹60,000 |
| 80CCD(1B) - NPS | ₹50,000 | ₹15,000 |
| 80D - Health Insurance | ₹50,000-75,000 | ₹15,000-22,500 |
| 24(b) - Home Loan Interest | ₹2,00,000 | ₹60,000 |
| 80E - Education Loan Interest | No limit | Varies (30% of interest) |
| Total Potential Deductions | ₹6,00,000+ | ₹1,95,000+ |
HRA Exemption at 20 LPA
With ₹8 lakh basic (40% of 20 LPA) and ₹30,000 monthly rent in a metro:
- Actual HRA received: ₹4,00,000 (50% of basic)
- Rent paid minus 10% of basic: ₹3,60,000 - ₹80,000 = ₹2,80,000
- 50% of basic (metro): ₹4,00,000
- HRA exemption = Minimum = ₹2,80,000
However, typical HRA exemption at this salary ranges from ₹2,00,000 to ₹2,50,000 depending on rent and exact salary structure.
Real-World Tax Planning at 20 LPA
At 20 LPA, you're in the highest tax bracket (30%). Every ₹100 you save through deductions saves you ₹31 in tax (including cess). This makes strategic tax planning extremely valuable:
- Home Loan: If you're planning to buy a house, home loan interest deduction alone can save ₹60,000+ annually
- NPS: ₹50K investment saves ₹15,000 in tax + builds retirement corpus
- Health Insurance: Protect your family + save ₹15,000-22,500 in tax
- Total Savings: With all deductions, you can reduce effective tax rate from 14.3% to 9.6%
Can You Switch Between Regimes?
Yes! Salaried individuals can choose their preferred regime every financial year when filing ITR. At 20 LPA, this flexibility is valuable — your optimal choice might change if you buy a house, get married, have kids, or your parents retire. Evaluate annually based on your actual deductions.
Calculate Your Tax Liability
At 20 LPA, your optimal tax strategy can save you ₹60,000-1,00,000 annually. Use our calculator to compare both regimes with your exact deductions, rent, home loan, and investments.
Use Tax CalculatorFrequently Asked Questions
Is 20 LPA a good salary in India in 2026?
Yes, 20 LPA is an excellent salary, placing you in the top 2-3% of Indian earners. After taxes and PF, you take home ₹1,40,000-1,49,000 monthly. Even in expensive metros like Mumbai/Bangalore with ₹40,000 rent and ₹60,000 expenses, you can comfortably save ₹40,000-50,000/month.
How much tax do I actually pay at 20 LPA?
With new regime and no extra deductions: ₹2,86,000 annually (₹23,833/month). With old regime and home loan + NPS + health insurance: ₹1,92,400 annually (₹16,033/month). The difference is ₹93,600 annually — almost ₹8,000 extra in your pocket every month with optimized planning!
Should I buy a house for tax savings at 20 LPA?
Buy a house for wealth building, not tax savings. Home loan interest deduction saves ₹60,000 in taxes, but you're paying ₹2L in interest. The real benefit is building equity and avoiding rent. Tax savings are a bonus, not the primary reason. At 20 LPA, you can afford EMIs of ₹50,000-70,000 for a ₹60-80 lakh home.
What's my home loan eligibility at 20 LPA?
At 20 LPA, banks typically offer home loans of ₹60-80 lakh (3-4x annual income). With good credit score and low existing EMIs, some banks may go up to ₹1 crore. EMI of ₹60,000/month is comfortably affordable, leaving you with ₹80,000-90,000 after EMI and tax.
Is NPS worth it for tax savings at 20 LPA?
Yes. At 30% tax bracket, ₹50,000 NPS investment costs you only ₹34,500 (after ₹15,500 tax savings). Your employer may also contribute another ₹50,000. However, remember NPS is locked till 60 with mandatory annuity purchase. Evaluate based on your retirement planning and liquidity needs.
Can I claim HRA if my salary has no HRA component?
No. If your salary structure doesn't include HRA component, you cannot claim HRA exemption even if you pay rent. However, you can request your employer to restructure your salary to include HRA (typically 40-50% of basic). This is standard practice and most companies will accommodate this request for tax planning purposes.
How much should I invest for maximum tax savings?
To maximize savings at 20 LPA in old regime: 80C (₹1.5L) + NPS (₹50K) + health insurance (₹50-75K) + home loan interest (₹2L) = ₹4-4.5 lakh in deductions. This brings your taxable income to ₹15-15.5 lakh and saves approximately ₹1.2-1.5 lakh in taxes compared to new regime with no deductions.
Do I need a CA for tax planning at this salary?
Highly recommended. At 20 LPA, professional tax advice can save you ₹50,000-1,00,000 annually through proper regime selection, deduction planning, and salary restructuring. A good CA costs ₹5,000-10,000 for ITR filing and consultation — easily a 10x return on investment. They can also help with investment planning, retirement planning, and wealth management.
What if I have rental income along with salary?
Rental income is added to your salary income after standard deduction of 30%. At 20 LPA salary, additional rental income pushes you further into the 30% slab, so 30% of net rental income goes to tax. Consider old regime if you have rental income + home loan on another property — you can offset rental income with loan interest.