income tax
Published on 23 July 2025
Minimize Tax Liability Under New Tax Regime for Rs 15.5 Lakhs Income
How to Legally Pay Zero Tax on ₹15.5 Lakh Salary under the New Regime (FY 2025–26)
Smart Salary Structuring, Real Deductions, and the Power of Section 87A
With the income tax return (ITR) deadline extended to September 15, 2025, salaried individuals earning up to ₹15.5 lakh annually still have time to bring their tax liability down to zero—legally, and within the boundaries of the new tax regime. While the new system (Section 115BAC) offers fewer exemptions, it still permits specific deductions that—if used wisely—can bring net taxable income below the ₹12 lakh threshold, unlocking the full Section 87A rebate.
Key Deductions Still Allowed under the New Tax Regime
While most traditional tax-saving tools are off the table, the following four elements remain fully deductible under the new regime (FY 2025–26):
- Standard Deduction (for salaried/pensioned taxpayers): ₹75,000
- Employer's NPS Contribution [Sec 80CCD(2)]: Up to 14% of basic + DA (for government employees) and 10% for others, subject to overall ceiling
- Employer's EPF Contribution: Up to 12% of basic salary (within ₹7.5 lakh annual cap, shared with NPS and superannuation)
- Interest on Home Loan (Let-Out Property Only) [Sec 24(b)]: Deduction of up to ₹3 lakh annually
Sample Salary Calculation: Bringing Taxable Income Below ₹12 Lakh
Let’s assume a total salary income of ₹15,50,000. Here’s how it can be optimized:
| Step | Particulars | Amount (₹) | Taxable Income (₹) |
|---|---|---|---|
| 1 | Gross Salary | 15,50,000 | 15,50,000 |
| 2 | Standard Deduction | -75,000 | 14,75,000 |
| 3 | Employer NPS Contribution (14% of basic ₹7.75L) | -1,08,500 | 13,66,500 |
| 4 | Employer EPF Contribution (12% of basic ₹7.75L) | -93,000 | 12,73,500 |
| 5 | Interest on Let-Out Home Loan | -3,00,000 | 9,73,500 |
Tax on ₹9.73 Lakh (FY 2025–26 Slabs: New Regime)
| Slab (₹) | Tax Rate | Tax Payable (₹) |
|---|---|---|
| Up to ₹4,00,000 | Nil | 0 |
| ₹4,00,001 – ₹8,00,000 | 5% | 20,000 |
| ₹8,00,001 – ₹9,73,500 | 10% | 17,350 |
| Total Tax | 37,350 |
Section 87A to the Rescue
Under the newly expanded Section 87A, taxpayers with taxable income up to ₹12 lakh can avail a full rebate of ₹37,500, thereby eliminating tax liability altogether.
Quick Eligibility Table – What's Allowed under New Regime
| Deduction Type | Max Eligibility | Allowed in New Regime? |
|---|---|---|
| Standard Deduction (Salary) | ₹75,000 | Yes |
| Employer’s NPS Contribution | 14% of Basic (Govt) | Yes (under 80CCD(2)) |
| Employer’s EPF Contribution | 12% of Basic | Yes (within ₹7.5L cap) |
| Home Loan Interest (Let-Out Only) | ₹3,00,000 | Yes |
| Home Loan Interest (Self-Occupied) | Not allowed | No |
| HRA, 80C/80D/80G, LTA | Various | Not allowed |
Strategy: How to Reach Zero Tax Legally
- Max Out Employer Contributions: Ensure both NPS and EPF components are included and maximised in your salary structure.
- Use Standard Deduction: Automatically reduces ₹75,000 from your salary—no action needed.
- Let-Out Property Interest: If you own a second home that is rented, claim up to ₹3 lakh in interest.
- Target Sub-₹12 Lakh Taxable Income: That’s the sweet spot for claiming full Section 87A rebate.
- Avoid Self-Contributions: Your own NPS/PPF/80C/80D investments don’t count under the new system.
Practical Points to Remember
- Employer-side contributions are what matter. Your personal investments won't help under the new regime.
- Only interest on rented (not self-occupied) property qualifies for deduction.
- Compensation structuring is key. Discuss tax-optimized salary components with your HR or finance team.
- Compare Old vs New Regime before filing—every case is different.
Final Word
With the right mix of employer contributions, standard deduction, and a let-out property loan, you can effectively bring your taxable income under ₹12 lakh—triggering full rebate under Section 87A and reducing your tax to zero.