How to pay zero tax on Rs 17,50,000 annual salary under new tax regime? Check calculations inside
New Tax Regime Rules: All individual categories, including individuals, senior citizens, and super senior citizens, will have to pay the same tax rates under the new tax regime.
When filing an income tax return (ITR), every taxpayer aims to minimise their tax liability. However, they find it difficult to decide between the new and old tax regimes. The taxpayers will benefit from the new tax regime now that the government has introduced new tax slabs. Choosing the new tax regime over the old tax regime has several benefits, especially for those who don't want to invest or save a lot of money. Under the new tax scheme, incomes over Rs 24,00,000, as opposed to the current Rs 15,00,000, will be subject to the highest tax rate of 30 per cent. This article will show calculations on paying zero tax on a Rs 17,50,000 annual salary. Take a look:
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Tax slabs under the new tax regime (FY 25-26)
Rs 0 - Rs 4 lakh: Nil tax
Rs 4 lakh - Rs 8 lakh: 5%
Rs 8 lakh - Rs 12 lakh: 10%
Rs 12 lakh - Rs 16 lakh: 15%
Rs 16 lakh - Rs 20 lakh: 20%
Rs 20 lakh - Rs 24 lakh: 25%
Above Rs 24 lakh: 30%
Should employees intimate tax regimes to the employers?
Yes, employees must inform their employers about the tax regime. If they don't do that, the default tax regime will be considered for the year.
Tax slabs under the new tax regime (FY 24-25)
Rs 0 - Rs 3 lakh: Nil tax
Rs 3 lakh - Rs 7 lakh: 5%
Rs 7 lakh - Rs 10 lakh: 10%
Rs 10 lakh - Rs 12 lakh: 15%
Rs 12 lakh - Rs 15 lakh: 20%
Above Rs 15 lakh: 30%
Same tax rates for all
All individual categories, including individuals, senior citizens, and super senior citizens, will have to pay the same tax rates under the new tax regime.
Surcharge
Under the new regime, the highest surcharge rate is 25 per cent, whereas under the previous regime, it was 37 per cent.
How to pay 0 tax on Rs 17,50,000 annual salary?
Yes, under certain conditions, if your annual income is Rs 17,50,000, then you also don't need to pay any tax. Let's understand this possibility in detail.
Salary breakup
Basic Pay: Rs 8,75,000
Personal allowance= Rs 2,48,900
PF: Rs 21,600 (minimum opted)
Gratuity: Rs 42,000 (4.8% of basic pay)
NPS: Rs 1,22,500 (employer's contribution)
Variable Pay: Rs 87,500
Flexi pay tax-free components: Rs 3,52,500
Total CTC: Rs 17,50,000
NPS and EPF
NPS employer contribution up to 14 per cent of basic pay and dearness allowance (DA), and EPF employer contribution up to 12 per cent of basic pay and DA provide tax benefit in the new tax regime.
Standard deduction
Under the new tax regime, the standard deduction is Rs 75,000.
Rs 17,50,000- Rs 75,000= Rs 16,75,000
NPS
If you opt for NPS, then you can invest 14 per cent of your basic salary under the new tax regime, as per the government rules.
Rs 16,75,000 – Rs 1,22,500 = Rs 15,52,500
Flexi Pay tax-free component
Conveyance: Rs 1,13,400
Books & Periodicals: Rs 80,000
Entertainment: Rs 89,100
Uniform: Rs 70,000
Total: Rs 3,52,500
Rs 15,52,500 – Rs 3,52,500 = Rs 12,00,000
Final taxable income
Taxable income= Rs 12,00,000
After a tax rebate of Rs 60,000 under Section 87A, the income will become tax-free.