New Regime Tax Calculations: The financial year 2024-25 is just about to end. Taxpayers can file their income tax return (ITR) in the old and new tax regimes.
However, the picture will change from the financial year 2025-26, which will start on April 1, 2025.
Taxpayers will be able to file their ITR as per the proposed new tax regime, which was introduced in Budget 2025 last month.
Main changes in new tax regime
The most striking change in the new tax regime is that income up to Rs 12,00,000 is tax-free for non-salaried individuals.
As far as salaried-class individuals are concerned, they don’t have to pay any tax till the income of Rs 12,75,000.
| Proposed Tax Regime | |
| Income Tax Slabs | Tax Rate |
| Upto Rs. 4,00,000 | NIL |
| Rs. 4,00,001 – Rs. 8,00,000 | 5% |
| Rs. 8,00,001 – Rs. 12,00,000 | 10% |
| Rs. 12,00,001 – Rs. 16,00,000 | 15% |
| Rs. 16,00,001 – Rs. 20,00,000 | 20% |
| Rs. 20,00,001 – Rs. 24,00,000 | 25% |
| Above Rs. 24,00,000 | 30% |
But what if their income is Rs 1,500,000? What will be the tax liability, and can they make it tax-free? How?
Tax liability on Rs 1,500,000 income
Before knowing that, let’s go through tax slabs in the proposed new tax regime. Here, you can see that income from Rs 12,00,000 to Rs 16,00,000 falls in the bracket of 15 per cent.
Tax liability on Rs 15,00,000 income
After a standard deduction of Rs 75,000 under Section 87A of the Income Tax Act, 1961, tax liability on the taxable income of Rs 14,25,000 will be Rs 97,500, where Rs 3,750 is the health and education cess.
Now the question is how to make it tax-free.
How to make Rs 15,00,000 income tax-free
In the proposed tax regime, there are certain relaxations that can make your income of Rs 15,00,000 tax-free.
- National Pension System contribution from employer’s side
- Conveyance bill reimbursement
- Uniform bill reimbursement
- Mobile phone bill reimbursement
- Food/entertainment bill reimbursement
Let’s go through them one by one.
NPS tax benefit to new regime taxpayers
Taxpayers can get a tax benefit on the employer’s contribution to their NPS account up to 14 per cent of their basic salary under Section 80CCD(2).
Let’s assume that the basic salary of a person earning Rs 15,00,000 is Rs 7,50,000. The 14 per cent employer contribution on it will be Rs 1,05,000.
Conveyance allowance
For conveyance that employees use for official purpose, they can claim reimbursement for the bills they pay.
One can get this reimbursement included in their salary structure to get tax benefits.
Let’s assume that at Rs 5,000 a month, you get the benefit of Rs 60,000 a year.
Uniform allowance
You may get it included in your salary structure.
At Rs 15,00,000, you may easily get Rs 2,000 a month as a uniform allowance, which in a year will be Rs 24,000>
Mobile phone bills
If you use your mobile phone or internet connection for office use, you can get reimbursement for it also.
It can be Rs 1,500 or more. At Rs 1,500 a month, you can get Rs 18,000 reimbursement a year for the mobile bill.
Food/entertainment bill
You can also get food/entertainment reimbursement as part of your salary structure.
At a Rs 15,00,000 salary package, the reimbursement can be Rs 3,000 a month or Rs 36,000 a year.
Tax liability after deduction
After a standard deduction, the taxable income was Rs 14,25,000.
If we include the sum of NPS employer contribution and reimbursements, it will be Rs 2,43,000.
After these deductions, the taxable income will be Rs 11,82,000, where after a rebate of Rs 38,200 under Section 87A, the entire income will be tax-free.
