Finance

Smart way to Pay Zero Tax on ₹18 Lakh Salary in New Tax Regime 2025

The new tax regime introduced in Budget 2020 has undergone key updates, making it the default choice for taxpayers in FY 2024-25. Thas been more updates and changes in new tax regime 2025 in the tax slabs and more. But did you know that you can legally pay zero tax even on a salary of ₹18,00,000? Yes, with the right combination of deductions and allowances, you can bring your taxable income below the rebate threshold.

Let’s break this down step-by-step and see how you can achieve zero tax liability this financial year.

1. Start With the Gross Salary

Annual Salary: ₹18,00,000. We will be considering your Gross annual salary to be ₹18,00,000. 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 a marginal relief if your income is less than Rs 12.75 lakh. However, you can still save more tax if your earn more than Rs 12.75 lakh.

2. Apply the Standard Deduction

Under the new tax regime, salaried employees are eligible for a standard deduction of ₹75,000.

Taxable income after deduction: ₹18,00,000 – ₹75,000 = ₹17,25,000

3. Claim Home Loan Interest (Let-Out Property)

If you’ve rented out a property purchased with a home loan, you can claim up to ₹2,00,000 interest deduction.

Revised income: ₹17,25,000 – ₹2,00,000 = ₹15,25,000

4. Employer’s NPS Contribution (Sec 80CCD(2))

If your employer contributes 12% of your salary (₹2,16,000) to the National Pension Scheme (NPS), this amount is tax-exempt.

Updated income: ₹15,25,000 – ₹2,16,000 = ₹13,09,000

5. HRA, LTA & Travel Allowances

Let’s assume allowances like HRA, LTA, or travel amount to ₹1,50,000 and qualify for exemption.

Adjusted income: ₹13,09,000 – ₹1,50,000 = ₹11,59,000

6. Gift Exemption or Pension Deduction

Received a gift or family pension? An additional exemption of up to ₹50,000 can be claimed.

Final taxable income: ₹11,59,000 – ₹50,000 = ₹11,09,000

7. Tax Rebate Under Section 87A🎯

If your taxable income is up to ₹12,00,000, you’re eligible for a rebate of ₹25,000, nullifying your total tax liability.

Income tax due: ₹25,000
Rebate: ₹25,000
Net tax: ₹0 ✅

Bottom Line 💡

By leveraging available deductions—like NPS contributions, home loan interest, allowances, and standard deductions—you can effectively pay zero tax on a salary of ₹18 lakh under the new regime. It’s all about smart financial planning.

You can also calculate your tax comparison between Old and New Tax regime using this link of Income Tax calculator.

Make sure to assess your salary components and tax-saving options before filing your ITR. The new tax regime 2025 might be default, but that doesn’t mean it’s the only choice. Understand both regimes before choosing what’s best for your financial goals.

Tax Slabs Under New tax Regime 2025:

Income Range	Tax Rate
₹0 – ₹4 lakh	0%
₹4 – ₹8 lakh	5%
₹8 – ₹12 lakh	10%
₹12 – ₹16 lakh	15%
₹16 – ₹20 lakh	20%
₹20 – ₹24 lakh	25%
Above ₹24 lakh	30%