Income Tax : In today’s economy, Smart tax management isn’t simply smart – it’s critical.
Although a minority of people making Rs. 19 lakhs per year accept that they will never be able to escape paying tax altogether, they do not know that it is possible evading this huge amount of tax if they know and strategies how to go about.
It’s not tax evasion, but tax efficiency, based on legitimate deductions, exemptions and your investment as well as other strategies permitted by India’s tax laws.
Income Tax The Starting Point: Comprehending Changes within the FY 2025-26 Tax Regime
The Union Budget 2025 brought in far reaching changes to the taxation system of India, especially in the new tax regime.
With these changes, the base for tax liability of an individual has come down to Rs. 12 lakhs as rebate under Section 87A has been increased by Rs. 60,000 only, meaning that the total income of up to Rs. 12 lakhs will be free from any tax liability and even for salaried individuals, so called standard deduction of Rs. 75000 makes an income of Rs. 1275000 fully free from any tax liability without any tax planning.
But then how do we move from 12.75 lac to 19 lac? Read more This involves a blend of selecting the correct regime, investment strategy and salary structuring.
Income Tax Choosing the Right Tax Regime
The first choice is crucial for someone with an income of Rs 19 lakh: which tax regime to pick?
As the new tax system proposes simplified procedures and reduced tax rates at the base, the old system has a plethora of deductions and exemptions, way below the line, that can push it way down.
For those with high incomes and seeking to reduce their tax to zero, the old system is generally better because of its plethora of deductions, notwithstanding its higher so-called marginal rates of tax.
Tax-Saving Investment and Deductibles that shouldn’t be missed
Section 80C, 80CCC and 80CCD(1): The Foundation (Rs 1.5 Lakh)
The popular tax saving route provides deductions up to Rs. 1.5 lakhs on investments in :
Contributory Provident Fund (CPF)
Public Provident Fund (PPF)
Equity Linked Savings Schemes (ELSS)
National Pension System (NPS)
Life Insurance Premiums
Tax-saving fixed deposits
Home loan principal repayment
Sukanya Samriddhi Account
Tuition fees for children
National Pension System Additional Deduction: Section 80CCD(1B) (Rs 50,000) You can contribute up to Rs.
Above the limit of Rs 1.5 lakh in Section 80C, another Rs 50,000 can be deducted through investment in NPS.
Employer’s NPS Contribution: u/s 80CCD(2) (Max upto Rs 2.66 Lakhs)
This is a game changer for the high-earning. According to this provision, if your employer contributes to your NPS account, you can avail of a deduction of up to 14% of your basic salary.
For an employee with salary of Rs. 19 lakhs, if the salary structure is designed to have higher basic (e.g., 70% or Rs. 13.3 lakhs), the employer NPS contribution can amount to Rs. 1.86 lakhs (14% of basic), all of it is tax exempt.
Income Tax Interest on home loan: Section 24(b) (Rs. 2 lakh)
You can avail a deduction of up to Rs. 2 lakhs on interest payment on housing loan for self-occupied property. This preclusion is over and above the Section 80C benefit on principal payment.
Health Insurance Premiums: Section 80D (maximum up to Rs. 1 Lakh)
Health insurance premium paid for self, family and parents can qualify for a significant deduction:
Self, spouse, dependent children are allowed a deduction up to Rs. 25,000
Another Rs. 25,000 for parents (Rs. 50,000 if parents are senior citizens)
This limit includes preventive check ups up (to the extent of upto Rs 5,000) for senior citizens also
Interest on Education Loan: Section 80E (No Maximum Limit)
You can claim the full interest on education loan paid by you or your dependent without any cap. The principal repayment doesn’t qualify for any deduction, however.
Income Tax Contributions to Certain Fund/Institutions: Section 80G
Contributions to certain described funds or charitable organizations may be deductible up to as much as 50% to 100% of the amount contributed, with certain limitations.
Salary Reorganization Strategically Follows!
So let’s cover some ways to decrease your taxable profits with proper salary structuring which is completed using specific exemptions:
House Rent Allowance (HRA)
1) For individuals who resides in let out premises:The Exemption under HRA is calculated as the least of :
Actual HRA received
50% or 40% of the basic salary (metro city and non-metro city, respectively)
Actual salary paid less 10% of basic salary
An individual having a salary of Say Rs. 13.3 lakhs (70% of the total salary) and renting in a metro would get an HRA tax-exemption of Rs. 3.3 lakhs or more annually pre-budget.
Leave Travel Allowance (LTA)
LTA is tax-free for two trips in a block of four year. So, for those who travel quite excessively, this can offer a deduction of up to Rs. 60,000-1 lakh, based on the actual cost of banking on fares.
Food Coupons and Meal Alllowance
Meal vouchers/ food allowances not exceeding Rs. 50 per meal for a total value upto Rs. 22, 000 per annum (Rs. 200 per meal) can result in a potential annual tax saving of Rs. 13,200.
Allowance to Books and Periodicals
Most companies provide a budget for professional books, magazines and periodicals and, on presentation of actual bills are free from tax.
Telephone and Internet Allowance
Telephone and internet costs for business are not taxed. This would result in a saving of about Rs. 24,000-Rs. 36,000 a year.
Example: Dividing 19 Lakhs of Earnings For instance, dividing 19 Lakhs of EarningsNOTE: You can divide your income from companies,i.e., from line 4, your Schedule C, by 12 or 52 (months or weeks per year) to get the average during those periods.
Let us now check how these strategies pan out in real life for a 19 lakh person:
Gross Total Income: 19 lacs.
Step 1: Salary Restructuring
Particulars Amount (INR) Basic Salary (70%) Rs. 13,30,000
HRA: Rs. 665000 (50% of basic)
Other allowances: Rs 2,05,000
Step 2: HRA Exemption If you live in Metro City and monthly rent is assumed Rs. 50,000 :
Received HRA (as per original calculations) : Rs. 6,65,000
50% of basic: Rs. 6,65,000
Rent paid less 10% of basic: Rs. 6,00,000 – Rs. 1,33,000 = Rs. 4,67,000 Minimum of Rs. 4,67,000, which is the exempt amount.
Step 3: Deductions
Section 80C investments: Rs. 1,50,000 WHAT THE PREACHERS OF TAX SAVING SAY Create time for whatever is new.
Other NPS (80CCD(1B)) : Rs 50,000
Employer NPS contribution (80CCD(2)): Rs. 1,86,200/ (14% of basic) +.
Interest on home loan (24(b)): Rs. 2,00,000
Health insurance premiums (80D): Rs 75,000 (self and parents)
LTA exemption: Rs. 60,000
Food vouchers: Rs. 13,200
Books, periodicals and reloading allowance: Rs. 24,000
Phone/internet allowance: Rs. 24,000
Total deductions and exemptions: Rs. 12,49,400 Total income after deductions and exemptions: Rs. 12,00,600
Step 4: Calculating the Taxable Income
Gross Income: Rs. 19,00,000
Less: Deduction and Exemptions: Rs. 12,49,400
Taxable Income: Rs. 6,50,600
Income up to Rs. 5,00,000 became practically tax-free under the old scheme due to rebated granted under section 87A, the balance of Rs. 1,50,600 would have attracted a tax of 20% which came to about Rs. 30,120 plus 4% cess.
There is also this additional unpaid tax liability that you have to lose if:
Donate more towards charity under Section 80G
If you or any of your dependents has an education loan, provide interest on it under Section 80E
If you’re a freelancer or have income from consulting, deduct eligible business expenses
Invest in Tax-saving instruments as per your goals 4. Sacrifice the right cards to get good savings of tax in hand
Key Facts for the Zero-Tax Strategy
Documentation is Crucial
Keep complete records on all investments, payments, and deductions taken. This comprises of the rent receipts, loan documents, investments proofs and also of medical bills.
Advance Tax Planning
Begin your tax planning at the start of the financial year and see to it that you’re not panicking through the last quarter. This results in planned investments and management of finances in a better way.
Regular Review of Tax Laws
Tax laws change frequently. Keep up to date with the latest changes and adapt to it. What worked well last year may not work as well this year.
Legitimate Claims Only
Aggressive tax planning is not a crime, but it is advisable to verify all claims and to make sure that there are transactions underlying these claims. Making false statements can subject someone to penalties and legal problems.
Holistic Financial Planning
Don’t make tax the only consideration in your financial planning. Incorporate tax planning into your other financial goals such as retirement planning, saving for your kids’ education and creating wealth.
Income Tax More than Just Tax Savings: Long-term Wealth Building
While minimizing taxes is important, consider the quality of the investment. Select options that not just save tax, but also create wealth in the longer run, according to your financial goals.
For example, ELSS mutual funds and NPS give you not only tax benefits but also possibility of earning capital returns.
Income Tax Conclusion
Though paying Nil tax on a Rs. 19 lakh income is virtually not easy but is possible through systematic planning and efficient use of tax laws.
“The key is to make use of various techniques to save taxes rather than just one.” Be cognizant that tax planning is not tax evasion – it is the judicious use of the legal provisions within the framework of law.
You can cut, or even eliminate, your tax liability as you grow a solid financial portfolio when you apply these techniques (consulted on with a tax professional whose familiar with these types of paperwork for your unique financial situation) from this guide.
The former is not only a year-end activity, and should be thought of as part and parcel of the overall financial planning that you are doing.
But with enough advanced preparation and execution, you can keep more of the money you make, and still do so entirely above board.
The point is not just to save tax; it is to make money most effectively within the confines of the law.