Income Tax Rule Update : No Tax will be Payable on Earning Rs 19 Lakh.
Income Tax : In the Union Budget 2025, under the new tax regime, income up to ₹12 lakh has been made completely tax-free. In addition to this, taxpayers will also get a standard deduction of ₹75,000, which means income up to ₹12.75 lakh will be entirely tax-free.
But do you know that by using certain legal provisions, you can make an annual income of up to ₹19.20 lakh completely tax-free? Let’s understand how you can achieve zero tax even on an income of more than ₹19 lakh.
How can income up to ₹19.20 lakh be tax-free under the new tax regime?
To avail tax exemption on income up to ₹19.20 lakh under the new tax regime, you need to invest in the National Pension System (NPS). By investing in NPS, you can reduce your taxable income, which may result in zero tax liability.
Before understanding how NPS affects your tax calculation and how much investment is required, let’s first look at the salary structure for an annual income of ₹19.20 lakh.
Salary Structure
If you earn ₹19.20 lakh annually, this amount is your CTC (Cost to Company), not your in-hand salary. The breakup is as follows:
- Basic Salary : ₹6,00,000
- Personal Allowance : ₹5,50,000
- Minimum PF Contribution : ₹21,600
- Gratuity : ₹28,800
- Variable Pay : ₹96,000
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Flexi Pay (Tax-Free Components) : ₹6,23,600
How you pay zero tax
Under the new tax regime, the government provides a standard deduction of ₹75,000, which reduces your taxable income from ₹19.20 lakh to ₹18,45,000.
If you opt for NPS, you get an additional tax deduction equal to 14% of your basic salary. Since the basic salary is ₹6 lakh, this amounts to a deduction of ₹84,000.
After this deduction, your taxable income comes down to ₹17,61,000.
Flexi Pay – Tax-Free Components
Employees with higher salaries can also take advantage of tax-free Flexi Pay components, which include:
- Conveyance Allowance: ₹2,85,600
- Books & Periodicals: ₹1,08,000
- Entertainment Allowance: ₹2,40,000
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Uniform Allowance: ₹90,000
The total tax-free Flexi Pay comes to ₹6,23,600.
When this amount is deducted from ₹17,61,000, the remaining taxable income becomes ₹11,37,400.
Since the government has made income up to ₹12 lakh tax-free under the new tax regime, a person with a CTC of ₹19.20 lakh will ultimately have zero tax liability.