us iran war2 hrs ago
How to pay 0 tax on Rs 20,00,000 income in old regime? Check calculations inside
- Written by Bhawna Gupta
Published: Zee Business| Updated: Zee Business
To achieve zero tax on an annual income of Rs 20,00,000 in India for FY 2025-26 (AY 2026-27), you need to leverage exemptions, deductions, and rebates available under the old and new tax regimes. The old tax regime offers multiple deductions and exemptions like Section 80C, 80D, HRA, etc, which can significantly reduce taxable income. To pay zero tax on Rs 20 lakh under the old regime, you need to reduce your taxable income to Rs 5 lakh or below to avail the full rebate under Section 87A (up to Rs 12,500). In this article, we will see an expert's calculations to pay zero tax on Rs 20 lakh salary under the old tax regime.
Images from Pixabay
Calculation courtesy: GenzCFO
1/14
CTC breakup
1/14First of all, let's check the salary breakup for Rs 20,00,000 income. Basic Salary: Rs 8,00,000 (40% of CTC) HRA: Rs 4,00,000 Special Allowance: Rs 6,50,000 LTA: Rs 1,50,000 Total CTC: Rs 20,00,000
2/14
HRA exemption
2/14House rent allowance (HRA) depends on salary structure, rent paid, and the city. Assume HRA is 50 per cent of basic salary, and rent paid is optimised.
1. Actual HRA received: Rs 4,00,000.
2. Rent paid minus 10% of basic salary: Assume rent paid is Rs 5,00,000. Exemption = Rs 5,00,000 - (10% of Rs 8,00,000) = Rs 4,20,000.
3. 50% of basic salary (metro city): 50% of Rs 8,00,000 = Rs 4,00,000.
HRA exemption = Rs 4,00,000 (minimum of the three).
3/14
Deductions and exemptions
3/14Gross Income: Rs 20,00,000 HRA Exemption: Rs 4,00,000 LTA Exemption: Rs 1,50,000 Standard Deduction: Rs 50,000 Gross Taxable Income: 14,00,000
4/14
Standard deduction under old tax regime
4/14In the old tax regime, the standard deduction is Rs 50,000.
5/14
Section 80C deductions
5/14The Income Tax Act allows up to Rs 1,50,000 per annum deductions under Section 80C. You can invest across PPF, NSC, ELSS, PPF EPF to take Section 80C benefits.
6/14
NPS- Self
6/14Self NPS Contribution Under Sec 80 CCD 1B is exempted from Income Tax, and the maximum limit for this is Rs 50,000.
7/14
NPS- Employer's contribution
7/14You can also claim 10 per cent of your basic pay and dearness allowance under the employer's NPS contribution (Section 80 CCD 2B).
8/14
Section 80D deductions for Self and parents
8/14Under Section 80D, individuals can claim a tax deduction on medical insurance premiums of up to Rs 50,000 per financial year for senior citizens and Rs 25,000 for non-senior citizens. Rs 50,000 is exempted under Section 80D, assuming the age of parents is more than 60.
9/14
Home loan
9/14Section 24(b): Home loan interest up to Rs 2 lakh (self-occupied property) is allowed under the old tax regime.
10/14
Donations
10/14Section 80G: Donations to eligible charities (50% or 100% deductible).
11/14
Loan interest on electric vehicles
11/14Section 80 EEB: Interest on electric vehicle loan of up to Rs 1,50,000 is allowed.
12/14
Standard deductions
12/14Gross taxable income: Rs 14,00,000 Section 80C: Rs 1,50,000 NPS: Rs 50,000+ Rs 80,000= Rs 1,30,000 Medical Insurance (Family): Rs 75,000 Housing Loan Interest: Rs 2,00,000 Education Loan Interest: Rs 85,000 Interest on savings bank account: Rs 10,000 Donations: Rs 1,00,000 Interest on electric vehicle loan: Rs 1,50,000 Total: Rs 9,00,000 Net taxable income: Rs 14,00,000- Rs 9,00,000= Rs 5,00,000
13/14
Old tax regime: Income slab rate
13/14Rs 0 – Rs 2,50,000- 0%
Rs 2,50,001 – Rs 5,00,000- 5%
14/14
Calculations
14/145%x(Rs 5,00,000 - 2,50,000) = Rs 12,500
Total tax liability is Rs 0 since Rs 12,500 rebate can be availed if the total taxable income is less than Rs 5,00,000 in the old regime.
- 1
- 2
- 3
- 4
- 5
- 6