How to pay 0 tax on Rs 18,20,000 annual salary under old tax regime? Check expert calculations inside

After a rebate, an annual income up to Rs 5 lakh is tax-free under the old tax regime.

Section 80C of the Income Tax Act is the most popular section, which provides exemptions on specific expenditures and investments from income tax. In total, there are more than 70 exemptions and deductions available under the old tax regime.

Up to Rs 1.5 lakh can be claimed as a deduction from the total income. You can show EPF (employee provident fund), PPF (public provident fund), ELSS (equity-linked savings scheme), NSC (national savings certificate), SSY (sukanya samriddhi scheme), SCSS (senior citizens savings scheme), among others. 

In this article, we will show expert calculations on how you can pay 0 tax on a salary of Rs 18,20,000 per year. Here's the step-by-step calculation:

CTC: Rs 18,20,000 Basic pay: Rs 9,10,000

Rs 18,20,000- Rs 1,50,000 (EPF, PPF, others) = Rs 16,70,000

Under 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 16,70,000- Rs 25,000 = Rs 16,45,000

50,000 is exempted under Section 80 D assuming age of parents is more than 60. Rs 16,45,000- Rs 50,000 = Rs 15,95,000

Further, you can take exemptions of up to Rs 2,00,000 under Section 24B for home loan interest. Rs 15,95,000- Rs 2,00,000= Rs 13,95,000

Education loan interest comes under Sec 80E of Income Tax Act. You can claim complete interest paid on education loan. Here, we are taking Rs 90,000 exemption under education loan interest.

Now taxable income will be Rs 13,05,000 (Rs 13,95,000- Rs 90,000)

Rs 50,000 standard deduction is allowed by the government. Rs 13,05,000- Rs 50,000= Rs 12,55,000

Self NPS Contribution Under Sec 80 CCD 1B is exempted from Income Tax and the maximum limit for this is Rs 50,000. You can also claim 10 per cent of your basic pay and dearness allowance under employer's NPS contribution (Section 80 CCD 2B).

We are taking Rs 50,000 self-contribution and Rs 1,08,000 employer's contribution for NPS. Your taxable income after NPS deductions will be Rs 10,97,000- [Rs 12,55,000-(Rs 50,000+Rs 1,08,000)]

Maximum HRA deduction is 4,80,000. This can be exempted under two conditions- actual HRA Received - Rs 6,00,000 and actual rent paid - 6,00,000 per annum.

Rs 10,97,000- Rs 4,80,000= Rs 6,17,000

Under Section 80G You can claim maximum donation of up to 10 per cent of your basic pay. Here, we are taking donations of Rs 40,000.

Rs 6,17,000- Rs 40,000= Rs 5,77,000

LTA+ meal allowance +books and periodical (Rs 60,000+ Rs 43,200+ Rs 21,600)= Rs 1,24,800

Rs 5,77,000- Rs 1,24,800= Rs 4,52,200

Now, your final taxable income is Rs 4,52,200. This means your tax liability will be Rs 0, as in the old tax regime, after a rebate, an annual income up to Rs 5 lakh is tax-free.