How to Pay Zero Tax on Rs 18,00,000 Salary Under the New Tax Regime?

Salary Under the New Tax Regime?

Salary Under the New Tax Regime? With the financial year 2025 coming to a close, taxpayers across India will soon begin filing their Income Tax Returns (ITR). Salary Under the New Tax Regime? With the new tax regime now the default option, many are curious about how they can save maximum tax. Salary Under the New Tax Regime? The good news? If you strategically use deductions and exemptions, you can pay zero tax on an annual income of Rs 18 lakh.

Understanding the New Tax Regime

Salary Under the New Tax Regime? The new tax regime was introduced in Budget 2020, and recently, changes were made to tax slabs to simplify taxation. Unlike the old tax regime, the new one offers lower tax rates but fewer exemptions. However, strategic planning can help you reduce your taxable income to Rs 12 lakh or below, ensuring zero tax liability.

Tax Slabs Under the New Tax Regime

Here are the revised tax slabs under the new system:

Additionally, under the new regime, the highest surcharge rate has been reduced to 25%, compared to 37% under the previous system.

How to Pay No Tax on Rs 18,00,000 Salary?

Let’s assume your annual gross salary is Rs 18,00,000, and you’re opting for the new tax regime. By utilizing exemptions and deductions strategically, you can bring down your taxable income and eliminate tax liability.

Step 1: Standard Deduction

Under the new regime, you now receive a standard deduction of Rs 75,000.

• Taxable Income After Deduction = Rs 18,00,000 – 75,000 = Rs 17,25,000

Step 2: Home Loan Interest Deduction

If you have rented out your house, you can claim home loan interest deduction of Rs 2 lakh under the new regime.

• Taxable Income After Home Loan Deduction = Rs 17,25,000 – 2,00,000 = Rs 15,25,000

Step 3: NPS, Allowances & Exemptions

Certain allowances in your salary, such as House Rent Allowance (HRA) and Leave Travel Allowance (LTA), remain tax-free. Suppose these allowances sum up to Rs 1,50,000, they further reduce taxable income.

• Taxable Income After Allowances = Rs 15,25,000 – 1,50,000 = Rs 13,75,000

Step 4: Family Pension Deduction & Gift Exemption

Another Rs 50,000 exemption can be applied if you receive a gift or a family pension.

• Final Taxable Income = Rs 13,75,000 – 50,000 = Rs 13,25,000

Step 5: Marginal Relief & Tax Rebate

Under new tax rules, if your taxable income is up to Rs 12 lakh, you qualify for a tax rebate of Rs 25,000. However, marginal relief applies up to Rs 12.75 lakh, ensuring that even if you earn slightly more than Rs 12 lakh, your total tax remains zero.

Since your taxable income after deductions falls within this limit, your tax liability becomes zero.

Conclusion: Pay Zero Tax on Rs 18 Lakh Salary

Salary Under the New Tax Regime? By making optimal use of deductions, allowances, and rebates, you can legally reduce your taxable income and avoid paying taxes on Rs 18 lakh salary. Salary Under the New Tax Regime? This makes the new tax regime a powerful tool for tax planning, especially for individuals who don’t avail multiple deductions under the old system.

While filing your ITR, you must manually select the old tax regime if you wish to opt for it, as the new tax regime is now set as the default.

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