Revised New Tax Regime: How you can pay 0 income tax on Rs 14.78 lakh annual income; see expert calculations

The main change in the new tax regime is that non-salaried individuals with up to Rs 12 lakh income and salaried individuals with up to Rs 12.75 lakh income a year need to pay 0 tax. The other changes are tax slabs. In the existing system, the 20 per cent tax slab started from Rs 12 lakh. Now it will start from Rs 16 lakh. The 25 per cent tax slab is newly introduced in the proposed slab changes. The 30 per cent tax slab starts from Rs 15 lakh, but in the proposed system, it will start from Rs 24 lakh.

Proposed 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%

Existing tax regime   Tax Slab for FY 2024-25 Tax Rate Up to Rs 3 lakh NIL 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%

The proposed slab changes will be implemented from Financial Year 2025-26. For this financial year, the existing new tax regime will be in place, and taxpayers need to file their ITR under that only.

Though the old tax regime was more inclined towards deductions, taxpayers can also find some of them in the proposed tax regime. E.g., taxpayers can get tax benefits on National Pension System (NPS) contributions. They can include reimbursement-related expenses like conveyance allowance and mobile phone expenses to get tax benefits.

Aastha Dhowan, Partner, N.A. Shah Associates, tells us that by contributing to NPS and having reimbursements such as travelling allowance for travelling between office and home and mobile phone allowance in their salary structure, how you can make your tax liability 0 on an annual income of Rs 14,77,500 lakh. 

To make the tax 0, the NPS contribution of a person earning Rs 14.77,500 should be Rs 1,78,500. Under -u/s 80CCD(2), this contribution will be tax-free.

The conveyance between travelling to the office and home should be Rs 12,000.

The annual mobile phone reimbursement should also be Rs 12,000.

The standard deduction on this income will be Rs 75,000. 

If we add travel and mobile reimbursements, the total amount will be Rs 24,000.

After all deductions, the remaining income will be Rs 12,00,000. 

The tax on this income will be Rs 60,000. But you don't have to pay that. Know why?

It's because under u/s 87A, you will get a rebate of Rs 60,000. The rebate will make the tax liability 0. It means that the taxpayer doesn't have to pay any income tax on an income of Rs 14,77,500.

Particulars Amount Basic        12,75,000 Employers contribution to NPS           1,78,500 Conveyance for travelling between office and home              12,000 Mobile phone reimbursement              12,000 GROSS SALARY        14,77,500     less: Deductions/ Exemptions   -Standard deduction            -75,000 -Reimbursement of telephone expenses (*)            -12,000 -Reimbursement of conveyance to and fro (office and home) (*)            -12,000 NET SALARY        13,78,500         Less: Chapter VI-A Deductions   -u/s 80CCD(2)         -1,78,500         TOTAL INCOME        12,00,000     Tax on above              60,000 Less: Rebate u/s 87A              60,000 Tax Payable                      -       (*) Subject to submission of proof of incurrance of expenses