Income tax return (ITR) filing has already started for FY25 (AY26). Meanwhile, the Income Tax Department has extended the deadline to file ITR for FY25 to September 15, 2025, from the original deadline of July 31, 2025. There are two tax regimes: old and new. Taxpayers can choose between these regimes as per their salary and investments throughout the year. In this article, let’s take a look at an example to learn how one can plan their taxes in an optimum way to make their tax outgo nil on annual income of Rs 15,50,000 under the new tax regime for FY26 (AY27).
New Tax Regime: How to bring your tax liability on Rs 15.5 lakh annual income to nil?
To pay zero tax on Rs 15.5 lakh income under the new regime, you need to reduce your taxable income to Rs 12,00,000 (Rs 12.75 lakh with standard deduction).
Let’s take an example where an employee’s gross salary is Rs 15.5 lakh, including a basic pay of Rs 7.75 lakh. Typically, the basic pay is about 40-50 per cent of CTC.
- Basic Pay: Rs 7,75,000
- Approved reimbursements: Rs 1,00,000
- NPS: Rs 1,08,500
- EPF: Rs 21,600 (minimum opted)
Home loans provide valuable tax benefits under both the old and new tax regimes, but the nature and extent of these benefits differ, say tax planners.
Deductions for home loans under the new tax regime
The new tax regime offers lower tax rates but eliminates most deductions and exemptions.
Calculations to pay 0 tax on salary of Rs 15,50,000/annum
NPS
If you opt for NPS, then you can invest 14 per cent of your basic salary under the new tax regime, as per the government rules. The limit is 10 per cent of basic salary under the old tax regime.
Rs 15,50,000 – Rs 1,08,500 (6,00,000*14%) = Rs 14,41,500
EPF
Rs 14,41,500 – Rs 21,600 = Rs 14,19,900
Approved reimbursements
Rs 13,91,000 – Rs 1,00,000= Rs 12,91,000
Home loan set-off
You can claim tax benefit if you have rented out the property and are earning rental income from it. In that case, you can subtract up to Rs 2 lakh of interest paid on the loan from the rent you earn to reduce your taxable income.
Rs 12,91,000 – Rs 2,00,000 = Rs 10,91,000
In other words, one can claim unlimited deductions for interest on a home loan under let-out property and no deduction for self-occupied property.
Although home loan benefits play an important role, they should not be the only criteria when selecting a tax regime, say tax planners.
Several other factors merit careful consideration.
Hence, the tax will be 0 as the final taxable income is below Rs 12,00,000.