News

Pay 0 Tax on Rs 18.50 Lakh Income: Having good earnings is a dream for many but saving tax on the same may be a cumbersome effort. Making tax liability 0 on a salary package significantly higher than the tax-free limit can be an uphill task. If you follow the new tax regime for the income earned in the financial year 2025-26, your income up to Rs 12,75,000 can be tax-free after taking the benefit of standard deduction and tax rebate. But what if you are earning Rs 18,50,000 in a financial year? Can you make your tax liability 0 in the new tax regime? It is very tough but not impossible. In this write-up, we will tell you many ways using which you may make your Rs 18,50,000 income tax-free.   

As per the tax slabs and after considering a standard deduction of Rs 75,000, here is the breakup of the total tax on an Rs 18,50,000 gross income.

After a standard deduction of Rs 75,000, the taxable income will be Rs 18,50,00-Rs 75,000= 17,75,000.  

0-Rs 4,00,000 (nil)- 

4,00,001-Rs 800,000 (5%)= Rs 20,000

8,00,001-Rs 12,00,000 (10%)= Rs 40,000

Rs 12,00,001-Rs 16,00,000 (15%)= Rs 60,000

16,00,001-Rs 17,75,000 (20%)= Rs 35,000

Total tax liability= Rs 1,55,000+ 4% of Rs 1,55,000 (education and health cess)= Rs 1,55,000+ Rs 6,200= Rs 1,61,200

We are assuming that on an Rs 18,50,000 gross income, the basic salary is Rs 9,25,000 (50 per cent of the gross income).

In the new tax regime, a salaried-class taxpayer can get up to Rs 75,000 standard deduction on their salary under Section 87A of the Income Tax Act, 1961.

After taking the benefit of this deduction, the taxable income will be Rs 18,50,000- Rs 75,000= Rs 17,75,000.

The new tax regime for FY 25-26 allows a taxpayer to get a tax benefit on the employer's contribution to their National Pension System (NPS) account. The maximum benefit in such a way can be 14 per cent of the basic pay. 

At an Rs 9,25,000 basic salary, the maximum NPS tax benefit available is Rs 1,29,500.

After the NPS tax deduction, the taxable salary will be Rs 17,75,000- Rs 1,29,500= Rs 16,45,500 

A salaried-class taxpayer can also get a tax benefit of up to 12 per cent of their basic pay on the employer's contribution to their Employees' Provident Fund (EPF).

There is no tax benefit on the employee's contribution to their own EPF account. 

At an Rs 9,25,000 basic pay, the maximum EPF tax benefit available is Rs 1,11,000.

After this EPF tax deduction, the taxable salary will be Rs 16,45,500- Rs 1,11,000= Rs 15,34,500.

A new regime taxpayer may also get an Rs 17,500 tax benefit if they invest Rs 1,50,000 in their Public Provident Fund (EPF) and Rs 1,00,000 in the Sukanya Samriddhi Account.

After an Rs 17,500 tax deduction, the taxable income will be Rs 15,34,500-Rs 17,500= Rs 15,17,000.

Under Section 10(15(i), a new tax regime taxpayer may save up to Rs 3,500 in income tax on the interest earned in a post office scheme.

After an Rs 3,500 tax benefit, the taxable income will be Rs 15,17,000-Rs 3,500= Rs 15,13,500

If you have paid tax on your entertainment, mobile, fuel, and transport bills, the new tax regime offers you tax benefits on the same.

These benefits are available only when you have paid these bills for official purposes.

However, to get them, you have to ask your company human resource (HR) manager to make these part of your gross salary. 

On a salary of Rs 18,50,000, you may get up to Rs 1,50,000 worth of tax benefits by including these reimbursements.

Entertainment bills- Rs 30,000

Transport allowance- Rs 70,000

Fuel bills- Rs 20,000

Mobile bills- Rs 15,000

Uniform bills- Rs 15,000

After a Rs 1,50,000 exemption, your taxable income is reduced to Rs 15,13,500-Rs 1,50,000= Rs 13,63,500. 

In the new tax regime, if you have taken a loan for a home that you have let out and you are paying higher interest than the rent you are getting, you can offset these losses against the profit. 

Suppose you are paying Rs 2,00,000 as home loan interest in a financial year and you are getting Rs 1,00,000 rent for the same property; you may get an Rs 1,00,000 tax benefit after offsetting your losses.

After taking the benefit of Rs 1,00,000, your taxable income will be Rs 13,63,500- Rs 1,00,000= Rs 12,63,000. 

In case of family pension income, up to Rs 25,000 or 1/3rd of the total pension in a financial year, whichever is lower, is exempt.

If you take that benefit, the total taxable income will be Rs 12,63,000- Rs 25,000= Rs 12,38,000.

You can see that your taxable income is still Rs 38,000 more than the tax-free income limit of Rs 12,00,000. 

The new tax regime has a lot of other tax saving options that may reduce this tax liability to 0. Some of the options are-

Contribution to Agni path Scheme under Section 80CCH(2) is 100 per cent exempt. 

Exemption for the 2nd vacant house is there, without considering deemed rent income

Income from life insurance policy under Section 10 (10D) is exempt.

Gratuity amount under Section 10 (10) up to Rs 25 lakh is exempt.

Using these options, you might not need to pay any tax on Rs 18,50,000 income.

(Disclaimer: This is not investment advice. Do your own due diligence or consult an expert for financial planning.)

Get Latest Business News, Stock Market Updates and Videos; Check your tax outgo through Income Tax Calculator and save money through our Personal Finance coverage. Check Business Breaking News Live on Zee Business Twitter and Facebook. Subscribe on YouTube.

LATEST NEWSBy accepting cookies, you agree to the storing of cookies on your device to enhance site navigation, analyze site usage, and assist in our marketing efforts.