Pay Zero Tax: Imagine earning ₹18.75 lakh annually and paying zero income tax. Sounds unreal? With India’s new tax regime and smart use of exemptions, this is legally achievable in FY 2025-26. Here’s how salaried Indians can maximize savings.
🚀 New Tax Regime Slabs (FY 2025-26)
Your tax liability starts here:
| Income Slab (₹) | Tax Rate |
|---|---|
| Up to 4,00,000 | 0% |
| 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% |
| Above 20,00,000 | 25-30% |
Salaried taxpayers enjoy a ₹75,000 standard deduction, making income up to ₹12.75 lakh tax-free after Section 87A rebate. But what about ₹18.75 lakh? ⬇️
Also Check: Honda Electric Bike Revolution: ACTIVA e:, QC1, and More Charge Into the Future
🔑 Step-by-Step: How ₹18.75 Lakh Becomes Tax-Free (Pay Zero Tax)
Assumptions:
-
Gross Salary: ₹18,75,000
-
Basic Pay: ₹9,37,500 (50% of salary)
Deductions to Claim:
-
Standard Deduction: ₹75,000
-
EPF (Employer Contribution): 12% of basic = ₹1,12,500
-
NPS U/s 80CCD(2): 14% of basic = ₹1,31,250
-
PPF/Sukanya Samriddhi Interest: ₹17,500 (exempt)
-
Post Office Scheme Interest [U/s 10(15)]: ₹3,500 (exempt)
Taxable Income Calculation:
Gross Salary: ₹18,75,000
Less Deductions: ₹75,000 + ₹1,12,500 + ₹1,31,250 + ₹17,500 + ₹3,500 = ₹3,39,750
Taxable Income = ₹18,75,000 – ₹3,39,750 = ₹15,27,750
Initial Tax Liability:
-
0–4L: ₹0
-
4–8L: 5% of ₹4L = ₹20,000
-
8–12L: 10% of ₹4L = ₹40,000
-
12–16L: 15% of ₹3,27,750 = ₹49,163
Subtotal = ₹1,09,163
+4% Cess = ₹4,367 → Total Tax = ₹1,13,530
Here’s the Game-Changer!
Offset ₹1,13,530 using additional exemptions:
-
Family Pension Exemption: ₹25,000 (or 1/3rd of pension, whichever is lower)
-
House Property: 30% of rent from let-out property is exempt.
-
Leave Encashment: Up to ₹25 lakh exempt [U/s 10(10AA)].
-
Agnipath Scheme: 100% deduction on contributions [U/s 80CCH(2)].
-
Gratuity: Up to ₹25 lakh exempt [U/s 10(10)].
Combine these strategically to wipe off the remaining tax!
Also Check: Odisha Greenlights ₹1191 Crore Renewable Energy Projects: A Leap Towards Sustainable Growth
💡 Key Deductions in New Tax Regime
| Deduction | Section | Max Benefit |
|---|---|---|
| Employer EPF | – | 12% of Basic+DA |
| Employer NPS | 80CCD(2) | 14% of Basic+DA |
| PPF/SSA Interest | 10(15) | Full exemption |
| Agnipath Scheme | 80CCH(2) | 100% of deposit |
| Transport Allowance (Disabled) | – | Full exemption |
| Gratuity | 10(10) | Up to ₹25 lakh |
❓ FAQ: Pay Zero Tax on ₹18.75 Lakh
Q1: Is this legal?
A: Absolutely! All deductions are government-approved for the new tax regime.
Q2: Can I claim both EPF and NPS?
A: Yes! Employer contributions to EPF (12% of basic) and NPS (14% of basic) are separately exempt.
Q3: What if I don’t have rental income?
A: Use other exemptions like leave encashment (₹25L exempt) or Agnipath Scheme (100% deduction).
Q4: Is the ₹75,000 standard deduction automatic?
A: Yes, it’s deducted from your gross salary before calculating tax.
Q5: Does the old regime offer more savings?
A: Possibly, but the new regime simplifies taxes with fewer compliance hassles.
Final Takeaway:
With ₹18.75 lakh income, zero tax is achievable by stacking employer contributions (EPF/NPS), interest exemptions (PPF/SSA), and property/family pension breaks. Track your investments, optimize deductions, and transform your salary into tax-efficient income!
⚠️ Disclaimer: This article is for informational purposes only. Tax outcomes depend on individual circumstances. Consult a certified CA or tax advisor before filing. The author assumes no liability for financial decisions made based on this content.