New Tax Regime: With the changed slab rates, standard deduction and salary structuring facility being provided by companies, it is now possible to pay ZERO tax even on salary up to ₹19,20,000. How? Let’s understand in detail now.
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New Tax Regime: Whenever we used to think of tax savings, we used to remember only 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.
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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% |
Remember that tax exemption of ₹25,000 is available under Section 87A on taxable income up to ₹12 lakh, i.e. tax = ₹0
Real salary breakup of ₹19.20 lakh CTC
Suppose your company structures the salary in this way.
| Component | Amount (₹) | Remarks |
|---|---|---|
| Basic Pay | ₹6,00,000 | ~31% of CTC |
| Personal Allowance | ₹5,50,000 | Excluding flexi parts |
| Employer PF (minimum opted) | ₹21,600 | ₹1,800 × 12 |
| Gratuity | ₹28,800 | 4.8% of basic |
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 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
Assume:
- Gift exemption, family pension, or other miscellaneous
- ₹8,77,400 – ₹50,000 = ₹8,27,400 (Final Taxable Income)
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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 to do 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 Flexi Pay plan. Also, you can increase the in-hand salary by opting for minimum Provident Fund.
