It is possible to pay zero tax on a ₹10 lakhs salary under the old income tax regime.
Here are some of the deductions and exemptions that you can claim to reduce your taxable income:
Standard deduction of ₹50,000.
Deduction under Section 80C of up to ₹1,50,000 for investments made in certain eligible instruments, such as:
Life Insurance Premium
National Savings Certificate
Equity-Linked Savings Scheme (ELSS)
Public Provident Fund (PPF)
Deduction under Section 80D of up to ₹25,000 for medical insurance premiums paid for self, spouse, and dependent children.
Deduction under Section 80TTA of up to ₹10,000 for interest paid on savings account.
Deduction under Section 80EE of up to ₹50,000 for interest paid on home loans for first-time home buyers.
Deduction for LTA (Leave Travel Allowance) of ₹40,000.
Deduction for HRA (House Rent Allowance) of ₹1,50,000.
Deduction for any reimbursements of ₹24,000.
If you claim the above deductions and exemptions, your taxable income will be reduced to ₹1 lakh. In this case, you will not have to pay any tax.
Here is an example of how the tax liability would be calculated for a taxpayer with a salary of ₹10 lakh:
LTA (Leave Travel Allowance)
HRA (House Rent Allowance)
Child’s Education & Hostel Allowance
PT (Professional Tax)
Taxable Salary Income
Total Taxable Income
Tax on Total Annual Income
Rebate (under Section 87A)
Total Tax Under Old Regime
So, as per the old tax regime, you will not have to pay any taxes!
However, if you opt for the new income tax regime, you cannot claim most of the deductions and exemptions available under the old regime.
The only deductions that are available under the new regime are:
Employer's contribution to NPS under Section 80CCD (2).
Investment in the Agniveer Corpus Fund under Section 80CCH.
If you have claimed any other deductions and exemptions under the old regime, you cannot claim them under the new regime. Your taxable income will increase under the new regime, and you may have to pay more tax.
However, the new income tax regime does have a higher tax rebate limit of ₹7 lakh, compared to ₹5 lakh under the old regime. This means that taxpayers with an income of up to ₹7 lakh will not have to pay any tax under the new regime.