A growing buzz around India’s revised income tax framework has sparked interest among salaried professionals, with claims that individuals earning as much as ₹15.85 lakh annually could end up paying zero income tax. While the headline may appear surprising at first glance, the explanation lies in how taxable income is calculated under the new tax regime introduced by the Government of India.
The new tax regime, which has now become the default system for individual taxpayers, was designed to simplify compliance by offering lower tax rates in exchange for fewer exemptions and deductions. A key feature of the updated regime is the enhanced rebate under Section 87A, which effectively eliminates tax liability for resident individuals whose taxable income does not exceed ₹12 lakh. For salaried taxpayers, this threshold can extend further due to the standard deduction.
Currently, a standard deduction of ₹75,000 is available to salaried individuals under the new regime. This means that a person earning ₹12.75 lakh annually would see their taxable income reduced to ₹12 lakh, making them eligible for a full rebate and resulting in zero tax liability. However, the more striking claim of zero tax on ₹15.85 lakh salary is based on additional permissible adjustments that can reduce taxable income further.
Although the new tax regime removes most traditional deductions such as those under Section 80C or exemptions like house rent allowance, certain components remain valid. Employer contributions to the National Pension System under Section 80CCD(2), along with specific allowances and structured salary components, can still be used to lower taxable income. When combined with the standard deduction, these elements can significantly reduce the portion of income that is subject to tax.
In such a scenario, an individual earning ₹15.85 lakh annually could potentially bring their taxable income down to ₹12 lakh or below, thereby qualifying for the rebate that wipes out their tax liability entirely. This, however, depends on how the salary package is structured and the extent to which eligible deductions are utilized within the framework of the new regime.
Tax experts caution that this outcome is not automatic and may not apply uniformly to all taxpayers. The effectiveness of such tax planning depends on factors such as employer policies, salary composition, and eligibility for specific benefits. Additionally, certain types of income, including capital gains or other special rate incomes, may not qualify for the rebate and could still attract tax.
Another important provision supporting taxpayers near the threshold is marginal relief. This ensures that individuals whose income slightly exceeds the rebate limit do not face a disproportionately higher tax burden, as the additional tax payable is restricted to the amount by which their income exceeds the threshold.
The government’s broader objective with the new tax regime has been to make the system more transparent and taxpayer-friendly, particularly for the middle-income segment. By increasing the rebate limit and retaining a few targeted deductions, the framework allows taxpayers to optimize their liabilities without navigating a complex web of exemptions.
Ultimately, the concept of paying zero tax on a ₹15.85 lakh salary underscores a key principle of the income tax system: it is the taxable income, not the gross salary, that determines tax liability. With careful financial planning and a clear understanding of the rules, some taxpayers may indeed find themselves with no tax to pay, even at relatively higher income levels.
Image generated by AI
Edited by Madhusudhan Reddy
Last Updated on: Sunday, April 12, 2026 5:13 am by Madhusudhan Reddy | Published by: Madhusudhan Reddy on Sunday, April 12, 2026 5:12 am | News Categories: Trending, Business