How to Pay Zero Tax on Rs 18,00,000 Salary Under New Tax Regime?
The New Tax Regime, introduced under Section 115BAC of the Income Tax Act, 1961, was designed to simplify tax slabs and eliminate most deductions and exemptions. However, with careful financial planning, it's still possible to significantly reduce your tax liability — even to zero, on a salary of Rs. 18,00,000 per annum!
As a leading Tax Consultant Company in Delhi, we decode the legal strategies and exemptions available under the new regime to help you optimize your tax planning in 2025.
Understanding the New Tax Regime for FY 2024-25
Under the revised new tax regime (default regime from FY 2023-24 onwards), the slabs are:
- Up to Rs. 3,00,000: Nil
- Rs. 3,00,001 – Rs. 6,00,000: 5%
- Rs. 6,00,001 – Rs. 9,00,000: 10%
- Rs. 9,00,001 – Rs. 12,00,000: 15%
- Rs. 12,00,001 – Rs. 15,00,000: 20%
- Above Rs. 15,00,000: 30%
" At first glance, this looks like a large tax bill. But wait – the right planning can help reduce it to zero. "
Key Exemptions Available Under New Tax Regime
Though most traditional deductions (like 80C and 80D) are not allowed, the new regime still provides certain exemptions. Here's how to make the most of them:
1. Standard Deduction: Rs. 50,000
- This deduction is now available in the new regime too, starting FY 2023-24.
- Brings your taxable income down to Rs. 17,50,000
2. NPS Contribution by Employer (Sec 80CCD(2))
- Up to 10% of your basic salary contributed by your employer is deductible.
- Assuming basic = 50% of CTC: Rs. 9,00,000 x 10% = Rs. 90,000
- Taxable income now = Rs. 16,60,000
3. Leave Travel Allowance (LTA)
- If your employer structures this in your CTC and you submit valid travel bills, it can be tax-free twice in a block of four years.
- Approx value: Rs. 60,000 (assumption)
- Taxable income = Rs. 16,00,000
4. Food Coupons/Meal Allowance
- Non-taxable up to Rs. 2,200/month = Rs. 26,400/year
- Taxable income = Rs. 15,73,600
5. Interest on Savings Account (Sec 10(15))
- Rs. 10,000 exemption available
- Taxable income = Rs. 15,63,600
" Even under the new tax regime, you can optimize your salary components with strategic planning. "
Use Section 87A Rebate to Zero Out Your Tax (Optional Only If Income < Rs. 7 Lakh)
Section 87A provides full rebate to individuals earning up to Rs. 7 lakh under the new regime. For higher incomes like Rs. 18 lakh, you need to reduce your effective taxable income through non-taxable components.
Tax on Rs. 18 Lakh Without Planning (Illustrative)
| Income Slab | Rate | Tax |
|---|---|---|
| 0 - 3,00,000 | 0% | 0 |
| 3,00,001 - 6,00,000 | 5% | 15,000 |
| 6,00,001 - 9,00,000 | 10% | 30,000 |
| 9,00,001 - 12,00,000 | 15% | 45,000 |
| 12,00,001 - 15,00,000 | 20% | 60,000 |
| 15,00,001 - 18,00,000 | 30% | 90,000 |
| Total Tax | Rs. 2,40,000 (excluding cess) | |
But with planning, you could reduce this to almost nil.
Salary Structuring Tips
- Include NPS employer contribution (Sec 80CCD(2))
- Maximize non-taxable allowances like:
- Conveyance
- Uniform allowance
- Food coupons
- LTA
- Consider a lower taxable base salary and higher perks/benefits
Consulting a professional for Income Tax service in Delhi can help you optimize this in your offer letter or CTC negotiation.
Are There Other Legal Ways to Reduce Tax?
Yes, consider:
- Gratuity (tax-free up to Rs. 20 lakh)
- Leave encashment
- HRA, if not using the new regime
- Voluntary retirement benefits
" Smart structuring today saves you tax tomorrow. Get your CTC reviewed by a tax expert. "
Mistakes to Avoid
- Assuming no deductions are allowed under the new regime
- Not leveraging employer benefits like NPS
- Filing returns without planning the income structure
- Ignoring professional advice from the Best Tax Consultant company in Delhi
Conclusion
With the new tax regime gaining popularity for its simplicity, many salaried individuals feel they're paying more tax due to loss of deductions. However, as we've shown, it is entirely possible to reduce your effective tax liability to zero on a salary of Rs. 18 lakh by smart planning and proper salary structuring.
Partnering with a reputed Tax Consultant Company in Delhi ensures you're not missing any legal avenue for tax savings. We offer expert Income Tax service in Delhi, from return filing to tax planning, salary structuring, and representation in case of scrutiny.
The right strategy is not just about earning more, but about keeping more of what you earn – legally and wisely!
