Income Tax Update: In the Union Budget 2025, the government has declared that under the revised tax framework, earnings up to ₹12 lakh will incur no income tax. Furthermore, a standard deduction of ₹75,000 will be applicable, thereby rendering income up to ₹12.75 lakh entirely tax-exempt.
However, are you aware that by utilizing specific legal provisions, it is feasible to achieve an annual income of up to ₹19.20 lakh without any tax liability? Let us explore how it is possible to have zero tax even on an income surpassing ₹19 lakh.
Nil Tax on ₹19.20 Lakh Income Under New Income Tax Regime -2026
To obtain tax exemption on income up to ₹19.20 lakh under the new tax regime, it is necessary to invest in the National Pension System (NPS). By making an investment in NPS, you can lower your taxable income, which may ultimately reduce your tax liability to zero.
Before delving into the workings of NPS taxation and the required investment amount, let us first examine the salary structure of an individual earning ₹19.20 lakh annually.
Salary Structure (CTC: ₹19.20 Lakh)
If your annual income amounts to ₹19.20 lakh, you will not receive the full sum as take-home salary. This figure represents your Cost to Company (CTC). The breakdown is as follows:
- Basic Salary: ₹6,00,000
- Personal Allowance: ₹5,50,000
- Minimum PF Contribution: ₹21,600
- Gratuity: ₹28,800
- Variable Pay: ₹96,000
- Flexi Pay (Tax-Free Components): ₹6,23,600
No Tax Payable
Under the new tax regime, the government provides a standard deduction of ₹75,000, reducing your taxable income from ₹19.20 lakh to ₹18,45,000.
If you opt for the National Pension System (NPS), you get an additional deduction of 14% of basic salary.
14% of ₹6,00,000 = ₹84,000
After this deduction, your taxable income comes down to ₹17,61,000.
Flexi Pay Tax-Free Components
Employees with higher salaries can further reduce taxable income through Flexi Pay tax-free components, which include:
- Conveyance Allowance: ₹2,85,600
- Books & Periodicals: ₹1,08,000
- Entertainment Allowance: ₹2,40,000
- Uniform Allowance: ₹90,000
Total Flexi Pay Tax-Free Amount: ₹6,23,600
When this sum is subtracted from ₹17,61,000, the resulting taxable income is ₹11,37,400.
Final Outcome: No Income Tax
Given that the government has rendered income up to ₹12 lakh exempt from tax under the new tax framework, an individual with a CTC of ₹19.20 lakh will ultimately incur no income tax, assuming they effectively organize their salary and invest in NPS.
