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.

Ready to optimize your tax planning? What strategies do you find most effective? Share your thoughts and questions below!