Breaking: Master Your Income Tax Return for FY25 (AY26) – A Guide to Zero Tax Liability
the Filing Of Income Tax Return (ITR) for Financial Year 2025 (Assessment Year 2026) is underway. The Income Tax Department has extended the deadline for filing Income Tax Return for Financial Year 2025 to September 15, 2025, giving taxpayers more time to comply.
Understanding how to navigate the old and new tax regimes is crucial.Taxpayers can select the regime that best suits their income and investment strategy. This detailed guide explores how to potentially reduce your tax liability to zero on an annual income of Rs 15,50,000 under the new tax regime for Financial Year 26 (Assessment Year 27).
New Tax Regime: Achieving Zero Tax on Rs 15.5 lakh Income
To eliminate your tax burden on a Rs 15.5 lakh income under the new tax regime, the key is reducing your taxable income to Rs 12,00,000, accounting for the standard deduction, which brings the initial figure to Rs 12.75 lakh.
Let’s examine a practical scenario: An employee with a gross salary of Rs 15.5 lakh, which includes a basic pay component of Rs 7.75 lakh. Typically, basic pay constitutes approximately 40-50 per cent of the Cost To Company (CTC).
- Basic Pay: Rs 7,75,000
- Approved Reimbursements: rs 1,00,000
- National Pension Scheme (NPS): Rs 1,08,500
- Employee Provident Fund (EPF): Rs 21,600 (minimum contribution)
Home loans,while offering tax advantages under both tax systems,exhibit differences in the nature and scope of these benefits,according to financial advisors.
Deductions for Home Loans Under the New Tax Regime
The new tax regime is characterized by reduced tax rates, but it largely eliminates deductions and exemptions. Understanding the nuances is vital.
calculations to Achieve Zero Tax on a Salary of Rs 15,50,000 Annually
NPS
By opting for the NPS, you can invest up to 14 per cent of your basic salary under the new tax regime, compliant with government regulations. Comparatively, the old tax regime allows for a limit of 10 per cent of basic salary.
Rs 15,50,000 – Rs 1,08,500 (14% of Rs 7,75,000) = Rs 14,41,500
EPF
Rs 14,41,500 – Rs 21,600 = Rs 14,19,900
Approved Reimbursements
Rs 14,19,900 – Rs 1,00,000 = Rs 13,19,900
Home Loan Set-Off
Tax benefits can be claimed if the property is rented out and generating rental income. In this case, you’re allowed to deduct up to Rs 2 lakh of the interest paid on the home loan from the rental income, effectively lowering your taxable income.
Rs 13,19,900 – Rs 2,00,000 = Rs 11,19,900
Essentially,taxpayers can claim unlimited deductions for interest on a home loan for a let-out property,whereas no deduction is available for a self-occupied property.
While home loan advantages are significant, experts advise against making them the sole deciding factor when choosing a tax regime. A holistic approach, considering all relevant factors, is recommended.
Consequently,the tax liability will be zero,as the final taxable income falls below Rs 12,00,000.
| Instrument | Tax Benefit | Limit (Rs) |
|---|---|---|
| NPS | Deduction on investment | 1,08,500 |
| EPF | Deduction on contribution | 21,600 |
| Home Loan Interest (Let-out Property) | Deduction from rental income | 2,00,000 |
Evergreen Insights on Tax Planning
Effective tax planning is not just about reducing your tax liability; it’s about making informed financial decisions that align with your long-term goals. Pro Tip: Consider consulting a financial advisor to tailor a tax strategy that suits your unique circumstances. Regular reviews of your tax plan are essential to adapt to changing tax laws and personal financial situations.
Did You Know? The income Tax Department provides various online tools and resources to help taxpayers understand and comply with tax regulations. Make use of these resources to stay informed and avoid common mistakes.
Frequently Asked Questions
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