Pay 0 Income Tax on Rs 17 Lakh Income: Earning a good pay package is one happiness, but paying income tax on it may feel like a pain. The new tax regime applicable for the financial year 2025-26, however, offers tax-free income up to Rs 12,75,000 for salaried-class individuals. With that, a monthly income of over Rs 1,06,000 effectively becomes tax-free.
If someone’s income is slightly higher than it, they will also get marginal relief, which will keep their tax liability to a minimum.
However, tax may seem a huge burden when the income is significantly higher than Rs 12,75,00.
Specially, if someone’s annual income from salary is Rs 17 lakh, they may run out of options to save tax, thinking that the new tax regime doesn’t offer many of them.
But it’s not quite a case.
Even in the new tax regime, a taxpayer may make their Rs 17 lakh salaried income tax-free if they take the benefit of certain deductions, contribute to retirement schemes, invest in long-term investments, and donate to the central government schemes.
Know how it may be possible (2 scenarios) –
Standard deduction
The standard deduction for salaried-class individuals is Rs 75,000. It makes their income of Rs 12,75,000 tax-free.
NPS tax benefit
In the new tax regime, a taxpayer can get a tax benefit on the employer contribution to their NPS account.
The maximum benefit in such a case is up to 14 per cent of the employee’s basic pay and dearness allowance (DA).
There is no tax benefit available on the employee contribution.
EPF tax benefit
A similar tax benefit is also available on the employer’s contribution to the employee’s EPF account. The maximum tax benefit allowed is 12 per cent of the employee’s basic pay and DA.
Other key tax benefits in new tax regime
100 per cent tax benefit on contributions to the central government’s Agnipath Scheme under Section 80CCH(2).
On travelling allowance on an actual basis, for travelling purposes, in case of transfer or office shifting.
On a daily allowance on an actual basis, but it will form part of CTC.
On conveyance allowance on an actual basis, but it will form part of CTC.
Rent income from let-out property will be exempt up to 30 per cent.
In case of family pension income, Rs 25,000 or 1/3rd, whichever is lower, is exempt.
Gratuity amount under Section 10 (10) up to Rs 25 lakhs is exempt.
Exemption for the second vacant house will be there, without considering deemed rent income.
Income from life insurance policy Under Section 10 (10D) is exempt.
Leave encashment allowance Under Section 10(10AA), up to Rs 25 lakh is exempt.
The voluntary retirement amount is exempt under Section 10 (10C) up to Rs 5 lakh.
No taxable perquites received from the office, like an office laptop, medical policy and interest-free loan are exempt forming part of salary.
Transport allowance for special-abled persons will also be exempt.
How to make Rs 17 lakh income tax free
Gross income- Rs 17,00,000
Standard deduction- Rs 75,000
EPF tax benefit (12% of basic pay and DA)- Rs 1,0,2000
EPF tax benefit (14% of basic pay and DA)- Rs 1,19,000
Tax benefit on PPF interest earned- Rs 17,500
Tax benefit on interest earned in post office scheme- Rs 3,500
Taxable income after taking these tax benefits- Rs 13,83,000
Income tax on this income- Rs 90,448 (including Rs 3,498 as education and health cess
| Particulars | Tax Rate | Income (Rs) | Tax amount (Rs) |
| Net Income | 17,00,000 | ||
| Basic pay (50% of net income) | 8,50,000 | ||
| Less: Standard Deduction | 75,000 | ||
| Deduction for EPF (12% of basic pay) | 1,02,000 | ||
| NPS deduction U/s 80 CCD (2) | 1,19,000 | ||
| Post Office Scheme Interest 10(15(i) | 3,500 | ||
| Interest on PPF/ Sukanya Yojna(1.5 lakhs +1 Lakhs) | 17,500 | ||
| Net taxable income | 13,83,000 | ||
| Income exempt up to Rs 4 lakh | Nil | 4,00,000 | |
| Income tax slab of Rs 4 lakh and up to Rs 8 lakh | 5% | 4,00,000 | 20,000 |
| Income tax slab of Rs 8 lakh up to Rs 12 lakh | 10% | 4,00,000 | 40,000 |
| Income tax slab of Rs 12 lakh up to Rs 16 lakh | 15% | 1,83,000 | 27,450 |
| Total income tax liability | – | 87,450 | |
| Cess at 4% on total income tax payable | – | 3,498 | |
| Final income tax liability (inclusive of cess) | – | 90,948 |
How to reduce this tax to 0 (Scenario 1)
One can make contributions to the central government’s Agniveer scheme (Rs 90,448 in this case) and get a 100 per cent tax deduction.
How to reduce this tax to 0 (Scenario 2)
One can request the human resource officer of their company to make transport allowance, entertainment allowance, book allowance, etc., part of their salary. On a Rs 17 lakh income, they can get up to Rs 90,448 as tax relaxation against the bill claims for these allowances.
