he Indian government has introduced significant changes to the New Tax Regime for the financial year 2025–26. These changes aim to provide relief to taxpayers, especially those in the middle-income group. With the revised tax slabs, standard deductions, and strategic salary structuring, individuals can now legally reduce their tax liability to zero, even with an annual salary of up to ₹19.20 lakh. This article breaks down the new tax slabs, deductions, and salary structuring methods to help you understand how to maximize your tax benefits.
New Tax Regime Slab Rates for FY 2025–26
The revised tax slabs under the New Tax Regime are as follows:
| Taxable Income (₹) | 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% |
| 20,00,001 – 24,00,000 | 25% |
| Above 24,00,000 | 30% |
Additionally, a standard deduction of ₹75,000 is available, and a rebate under Section 87A ensures that individuals with taxable income up to ₹12 lakh pay no tax.
Structuring Salary for Zero Tax Liability
To achieve zero tax liability on a salary of ₹19.20 lakh, consider the following salary structure:
- Basic Pay: ₹6,00,000
- Personal Allowance: ₹5,50,000
- Employer’s Provident Fund (PF) Contribution: ₹21,600
- Gratuity: ₹28,800The Times of India
Step-by-Step Taxable Income Calculation
- Standard Deduction: Subtract ₹75,000
- ₹19,20,000 – ₹75,000 = ₹18,45,000
- Employer’s NPS Contribution: Subtract ₹84,000 (14% of Basic Pay)
- ₹18,45,000 – ₹84,000 = ₹17,61,000
- Tax-Free Components in Flexi Pay:
- 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 = ₹11,37,400Income Tax IndiaIncome Tax Department+1Income Tax Department+1
- Home Loan Interest & Rental Income Set-off:
- Interest Deduction: ₹2,00,000
- Rental Income Adjustment: ₹60,000
- Total: ₹2,60,000
- ₹11,37,400 – ₹2,60,000 = ₹8,77,400Income Tax Department+1Income Tax Department+1
- Other Deductions: Assume ₹50,000
- ₹8,77,400 – ₹50,000 = ₹8,27,400 (Final Taxable Income)
Steps to Achieve Zero Tax
- Optimize Flexi Pay: Include tax-free components like conveyance, books, entertainment, and uniform allowances.
- Minimize PF Contribution: Opt for the minimum mandatory PF contribution to increase take-home salary.
- Employer’s NPS Contribution: Ensure your employer contributes 14% of your Basic Pay to NPS.
- Home Loan Benefits: Utilize deductions on home loan interest and adjust rental income.
- Other Deductions: Claim any other applicable deductions up to ₹50,000.The Economic Times
By strategically structuring your salary and utilizing available deductions, you can effectively reduce your taxable income to zero under the New Tax Regime.
Conclusion
In the New Tax Regime starting FY 2025–26, paying zero tax on a salary of up to ₹19.20 lakh is now possible with smart planning. By using the standard deduction, employer contributions to NPS, tax-free components in Flexi Pay, and benefits like home loan interest set-off, your taxable income can be brought down significantly. The final step is claiming the Section 87A rebate if your taxable income is ₹12 lakh or less—this makes your total tax zero.This approach is ideal for salaried individuals who work with their HR to structure their salary wisely.
FAQ’S
How much income is tax free in new tax slab?
Income up to Rs.12.75 lakh qualifies for zero tax due to rebate.
In which year 12 lakh income is tax free?
In the Union Budget 2025-26, the government announced zero tax on income up to Rs 12 lakh, apart from changing income tax slabs.
How much income can be tax free?
Under the new tax regime, individuals with incomes up to INR ₹7 Lacs don’t have to pay tax.
Can I pay zero tax on ₹19.20 lakh salary?
Yes, with smart structuring and deductions, tax can be zero.
Is standard deduction available in the New Tax Regime?
Yes, ₹75,000 standard deduction is available for salaried people.
Do I need to invest in 80C options to save tax?
No, 80C is not required under the New Regime for zero tax.