New Tax Regime: The central government has made a major announcement for the middle class in Budget 2025. Under the New Tax Regime, annual income up to ₹12 lakh has been made completely tax-free.
This means if your income is up to ₹12 lakh per year, you won’t have to pay even a single rupee as tax.
Additionally, the government has provided an extra tax deduction of ₹75,000, making a total of ₹12.75 lakh tax-free.
But do you know that with some smart planning, you can actually make your annual income up to ₹19.20 lakh completely tax-free?
Yes, with the right strategy and financial planning, even income above ₹19 lakh can attract zero tax liability. Let’s find out how.
First, Understand the Salary Structure
Suppose your Cost to Company (CTC) is ₹19.20 lakh per year.
The salary structure would look like this:
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Basic Pay: ₹6,00,000
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Personal Allowance: ₹5,50,000
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PF Contribution: ₹21,600
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Gratuity: ₹28,800
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Variable Pay: ₹96,000
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Flexi Pay (Tax-Free Components): ₹6,23,600
Important: You don't receive the full CTC amount in hand, as deductions like PF, gratuity, and others are applied.
Now, How to Achieve Zero Tax?
1. Standard Deduction of ₹75,000
Under the New Tax Regime, the government is offering a standard deduction of ₹75,000.
After applying this, your income will reduce to:
₹19,20,000 - ₹75,000 = ₹18,45,000
2. Take Advantage of NPS (National Pension System)
If you invest in NPS, you get an additional tax benefit of up to 14% of your basic salary.
Here, the basic salary is ₹6 lakh, so 14% of that would be ₹84,000 eligible for deduction.
Reducing your income further:
₹18,45,000 - ₹84,000 = ₹17,61,000
3. Benefit from Flexi Pay Tax-Free Components
Flexi Pay includes components that are entirely tax-free, such as:
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Conveyance Allowance: ₹2,85,600
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Books and Periodicals Allowance: ₹1,08,000
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Entertainment Allowance: ₹2,40,000
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Uniform Allowance: ₹90,000
Adding these up gives you a total tax-free amount of:
₹6,23,600
Subtracting this from your reduced income:
₹17,61,000 - ₹6,23,600 = ₹11,37,400
4. Final Step: Taxable Income Below ₹12 Lakh
Since the 2025 Budget provides zero tax for income up to ₹12 lakh under the New Tax Regime, your tax liability will now become zero.
A Simple Breakdown:
| Event | Income (in ₹) |
|---|---|
| Original CTC | 19,20,000 |
| Standard Deduction | -75,000 |
| NPS Deduction | -84,000 |
| Flexi Pay Tax-Free Components | -6,23,600 |
| Net Taxable Income | 11,37,400 |
And since there’s no tax on income up to ₹12 lakh, you end up paying zero tax — even with a CTC of ₹19.20 lakh!