Zero Tax on salary - Rightsofemployees.com https://www.rightsofemployees.com Know Your Rights Fri, 25 Apr 2025 11:08:52 +0000 en-US hourly 1 https://wordpress.org/?v=7.0.4 https://www.rightsofemployees.com/wp-content/uploads/2018/01/cropped-emp1-32x32.png Zero Tax on salary - Rightsofemployees.com https://www.rightsofemployees.com 32 32 New Tax Regime: Zero Tax on salary up to ₹19,20,000 in New Tax Regime! see the calculation https://www.rightsofemployees.com/new-tax-regime-zero-tax-on-salary-up-to-%e2%82%b91920000-in-new-tax-regime-see-the-calculation/ Fri, 25 Apr 2025 11:08:52 +0000 https://www.rightsofemployees.com/?p=43093 New Tax Regime: Whenever we used to think of tax savings, we only remembered the Old Tax Regime, in which tax exemption was taken by claiming HRA, LTA, 80C. But now the government has made the New Tax Regime more friendly. Especially from FY 2025–26, this regime will suit most taxpayers more. With the changed […]

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]]> New Tax Regime: Whenever we used to think of tax savings, we only remembered the Old Tax Regime, in which tax exemption was taken by claiming HRA, LTA, 80C. But now the government has made the New Tax Regime more friendly.

Especially from FY 2025–26, this regime will suit most taxpayers more. With the changed slab rates, standard deduction and now the salary structuring facility being provided by the companies, it is possible to pay ZERO tax even on a salary of up to ₹ 19,20,000. How? Let us now understand in detail.

How will ZERO TAX be implemented?

From FY 2025–26, the slabs of the New Tax Regime have been changed and along with that companies are now making the salary structure tax friendly. The result is that even if your annual salary is up to ₹19.20 lakh, you can pay ZERO TAX by making sensible deductions and structuring.

New Tax Regime- FY 2025–26 Slabs

Taxable Income (in ₹) Tax Rate (%)
0 – 4,00,000 NIL
4,00,001 – 8,00,000 5%
8,00,001 – 12,00,000 10%
12,00,001 – 16,00,000 15%
16,00,001 – 20,00,000 20%
20,00,001 – 24,00,000 25%
> 24,00,000 30%

Keep in mind that under Section 87A, a tax exemption of ₹25,000 is available on taxable income up to ₹12 lakh, i.e. tax = ₹0

Real salary breakup of ₹19.20 lakh CTC

Suppose your company structures salaries like this.

Component Amount (₹) Calculation Basis
Basic Pay ₹9,60,000 50%
Personal Allowance ₹4,72,320 Fixed component (excluding flexi parts)
Employer PF (Flat)** ₹21,600 ₹1,800 × 12 (fixed min opted)
Gratuity ₹46,080 4.8% of basic = ₹9.6L × 4.8%
Variable Pay (5%) ₹96,000 5% of ₹19,20,000
Flexi/MPMC Components ₹6,23,600 Books, car, entertainment etc.
Total CTC ₹19,20,000

 

Step-by-step calculation of taxable income

1. Standard Deduction – ₹75,000

₹19,20,000 – ₹75,000 = ₹18,45,000

2. Employer NPS Contribution – ₹84,000

(14% of Basic as per rules)
₹18,45,000 – ₹84,000 = ₹17,61,000

3. Flexi Pay  tax-free components – ₹6,23,600

Flexi Pay Category Amount (₹)
Car/Conveyance ₹2,85,600
Books & Periodicals ₹1,08,000
Entertainment ₹2,40,000
Uniform ₹90,000
Total ₹6,23,600

₹17,61,000 – ₹6,23,600 = ₹11,37,400

4. Home Loan Interest + Rental Income Set-off – ₹2,60,000

If the house is a let-out:

  • Interest Deduction: ₹2,00,000

  • Rental Income Adjustment: ₹60,000

₹11,37,400 – ₹2,60,000 = ₹8,77,400

5. Other Deductions – ₹50,000

Let’s say:

  • Gift exemption, family pension, or other miscellaneous

₹8,77,400 – ₹50,000 = ₹8,27,400 (Final Taxable Income)

Now understand the calculation of tax

Slab Income Range Rate Tax (₹)
NIL ₹0 – ₹4,00,000 0% ₹0
5% ₹4L – ₹8L 5% ₹20,000
10% ₹8L – ₹8.27L 10% ₹2,740
Total Tax Payable ₹22,740
Section 87A Rebate ≤ ₹12L income , ₹22,740
Net Tax ₹0

What needs to be done for Zero Tax?

  • Correct structuring of Flexi Pay

  • Minimum PF (₹1,800/month)

  • Employer NPS Contribution

  • Home Loan Interest Benefit (with let-out)

  • Other Income Adjustment + ₹50K exemption

The combination of all these makes your salary of ₹19.20 lakh tax free. You can request your HR to prepare your salary structure with a Flexi Pay plan. You can also increase your in-hand salary by opting for a minimum Provident Fund.

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