CBSE19 min ago
Pay 0 tax on Rs 18.25 Lakh Income: How your Rs 18,25,000 salaried income may be tax-free in new tax regime
- Written by ZeeBiz WebTeam
Published: Zee Business| Updated: Zee Business
0 tax on Rs 18.25 Lakh Income: We feel motivated when we start our job with a high salary package or when our salary in the same company rises to a good level. But once our salary crosses the tax-free income limit, the burden of paying tax subconsciously occupies our thoughts. We think that despite a salary hike, the in-hand salary may not rise to a satisfactory level, as much of the amount will go to the taxman. In Budgets 2025, Finance Minister Nirmala Sitharaman increased the tax-free income limit to Rs 12,75,000 for salaried-class individuals. It made a monthly income of over Rs 1,06,000 effective tax-free. But beyond that salary, a salaried-class taxpayer needs to pay tax as per their income slab. If their salary is Rs 18,25,000, the total tax liability will be Rs 1,56,000. But is there a way to make this liability 0 and pay no tax on your income? We take you through various deductions and tax benefits you may use in the new tax regime to pay no tax on such an income.
(Photos: Unsplash/Pixabay/Pexels)
(Disclaimer: This is not tax advice. Do your own due diligence or consult an expert for financial planning.)
1/8
Income tax slabs in new tax regime
1/8
New Tax Regime
Income Tax Slabs
Tax Rate
Upto Rs. 4,00,000
NIL
Rs. 4,00,001 - Rs. 8,00,000
5%
Rs. 8,00,001 - Rs. 12,00,000
10%
Rs. 12,00,001 - Rs. 16,00,000
15%
Rs. 16,00,001 - Rs. 20,00,000
20%
Rs. 20,00,001 - Rs. 24,00,000
25%
Above Rs. 24,00,000
30%
2/8
Income tax on Rs 18,25,000 as per these slabs
2/80-Rs 4,00,001- nil
Rs 4,00,000-Rs 8,00,001- Rs 20,000
Rs 8,00,001-Rs 12,00,000- Rs 40,000
Rs 12,00,001-Rs 16,00,000- Rs 60,000
Rs 16,00,001-Rs 17,50,000 (after a standard deduction of Rs 75,000)- Rs 30,000
Total= Rs 1,50,000+4% education cess of Rs 1,50,000= Rs 1,56,000
3/8
How you may reduce this tax to 0
3/8The new tax regime provides a standard deduction of up to Rs 75,000. After taking the benefit of it, the taxable income will become Rs 17,50,000= Rs 18,25,000-Rs 75,000.
4/8
NPS and EPF tax benefits
4/8A salaried-class taxpayer can get a tax benefit of up to 14 per cent of their basic salary on the employer's contribution to their National Pension System (NPS) account.
The employee gets no benefit on their own contribution to their NPS account.
Similarly, a salaried-class taxpayer can get a tax benefit of up to 12 per cent of their basic salary on the employer's contribution to their Employees' Provident Fund (EPF) account.
However, the employee gets no benefit on their own contribution to their EPF account.
On an Rs 18,25,000 salary, we assume a basic salary of Rs 9,12,500 (50% of Rs 18,25,000).
On an Rs 9,12,500 basic pay, the maximum NPS tax benefit can be Rs 1,27,750.
On the same basic salary, the maximum EPF tax benefit can be Rs 1,09,500.
Taxable income after NPS and EPF tax benefits= Rs 15,12,750.
5/8
Tax benefit on interest earned in PPF, Sukanya Samriddhi Account, post office schemes
5/8A taxpayer can benefit from the interest earned on their PPF and SSA investments. Since both of them have an investment limit of Rs 1.5 lakh a financial year, we are assuming a total tax benefit of Rs 17,500 in a financial year.
After this deduction, the taxable income will be Rs 15,12,750-17,500= Rs 14,95,250.
Under Section 10(15)(i), a taxpayer can take the benefit of the interest earned in a post office scheme. The exemption allowed is up to Rs 3,500.
After the exemption, the taxable income will be Rs 14,95,250-Rs 3,500= Rs 14,91,750.
6/8
Rs 1.50 lakh exemption on entertainment, mobile, uniform bills
6/8If you have already paid tax on your entertainment, mobile, fuel, transport bills, etc., you may claim tax benefits against them while filing your ITR in the new tax regime.
These benefits are available when you have used these facilities for official purposes.
On a salary of Rs 18,25,000, you may talk to your company human resource (HR) officer and get these reimbursements included in your pay. It may be possible to get included reimbursement bills up to Rs 1,50,000 on this salary.
Let's assume your reimbursements are.
Entertainment bills- Rs 40,000
Fuel bills- Rs 15,000
Transport allowance- Rs 60,000
Mobile bills- Rs 15,000
Uniform bills- Rs 20,000
After a Rs 1,50,000 tax benefit, your taxable income will be Rs 14,91,750-Rs 1,50,000= Rs 13,41,750.
You still have an Rs 1,41,750 tax liability. But in the new tax regime, there are a number of other tax benefits that may reduce your tax liability to zero.
7/8
Other tax benefits that may make your income tax-free
7/8Family pension income, up to Rs 25,000 or 1/3rd of the total pension in a financial year, whichever is lower, is exempt.
Contribution to Agni path Scheme under Section 80CCH(2) is 100 per cent exempt.
Rental income from a let-out property is exempt up to 30 per cent.
Exemption for the 2nd vacant house is there, without considering deemed rent income
8/8
Other tax benefits that may make your income tax-free
8/8Income from life insurance policy under Section 10 (10D) is exempt.
Gratuity amount under Section 10 (10) up to Rs 25 lakh is exempt.
- 1
- 2
- 3
- 4
- 5
- 6