Can your Rs 18,00,000 income be tax-free under new tax regime? See calculations to see its possibility

New tax regime slabs are creating a lot of buzz. The government has made income up to Rs 12 lakh tax-free. For salaried-class individuals, this limit is Rs 12.75 lakh. But you can save tax on an income significantly higher than that. The revised new tax regime, which will be applicable for the Financial Year 2025-26, has many provisions that provide opportunities to taxpayers to save tax immensely. Not just Rs 12,75,000. But you can make your Rs 18,00,000 annual income entirely tax-free. Know what are the significant tax-saving provisions are in the new tax regime, and how you can make your Rs 18,00,000 income tax-free.

Before doing the calculations of paying zero tax, let’s check the slabs, standard exemptions, and deductions under the new tax regime.

Slabs under the new tax regime

Rs 0- Rs 4 lakh: Nil
Rs 4 lakh- Rs 8 lakh: 5%
Rs 8 lakh- Rs 12 lakh: 10%
Rs 12 lakh- Rs 16 lakh: 15%
Rs 16 lakh- Rs 20 lakh: 20%
Rs 20 lakh- Rs 24 lakh: 25%
Above Rs 24 lakh: 30%

New Tax Regime: Standard deduction

In the new regime, you now get a standard deduction of up to Rs 75,000. 

Under the new tax regime, taxpayers need to pay 0 tax if their income is up to Rs 12 lakh per annum. The government has also provided marginal relief if your income is less than Rs 12.75 lakh. However, you can still save more tax if you earn more than Rs 12.75 lakh.

Calculations of paying 0 tax on Rs 18 lakh income
Standard deduction: Rs 75,000
Rs 18,00,000- Rs 75,000= Rs 17,25,000

If you have rented out your house, interest up to Rs 2 lakh can be deducted from tax. Home loan interest can be set off in the new tax regime. The government has set its limit to Rs 2 lakh. That means Rs 17,25,000 – Rs 2,00,000 = Rs 15,25,000.

NPS

If your company is contributing up to 14 per cent of your salary to NPS, then that amount is completely tax free. This exemption is available under section 80CCD (2). Suppose company contributes Rs 2,16,000 (12% of Rs 18 lakh) annually to NPS, then Rs 15,25,000 – Rs 2,16,000 = Rs 13,09,000.

HRA, LTA, Travel allowances

If there are some valid allowances in your salary like HRA or LTA, then they are also exempt from tax. Suppose there are such allowances up to Rs 1,50,000, then Rs 13,09,000 – Rs 1,50,000 = Rs 11,59,000.

Family pension deduction or gift exemption

There is a tax exemption of up to Rs 50,000 in family pension deduction or gift. If you have received a gift up to Rs 50,000, that too is tax-free. This means the final taxable income will be Rs 11,09,000. 

Final taxable income

According to the new rules, a tax rebate of Rs 25,000 is available on taxable income up to Rs 12 lakh. According to the slab, the tax is Rs 25,000, and after rebate, the net tax = Rs 0. Your entire salary of Rs 18 lakh has become tax-free.