Income Tax Calculation: The last date for filing ITR has been extended by CBDT to 15 September. Along with the due date of ITR, you also have to pay income tax. If someone tells you that in the financial year 2025-26 (AY 2026-27) you will not have to pay any income tax on income up to Rs 20 lakh, then you may not believe it. But for this you will have to take advantage of the exemptions, deductions and rebates available in the old tax regime.
In the old tax regime, the tax payer gets many types of deductions and exemptions. Like section 80C, 80D, HRA etc. Through all these, your taxable income is reduced considerably. Under the old regime, to pay zero tax on an income of Rs 20 lakh, you had to bring your taxable income to Rs 5 lakh or less. This will enable you to avail the full rebate (Rs 12,500) under section 87A.
For this, you first have to understand the CTC breakup of Rs 20 lakh. In this, your basic salary will be Rs 8 lakh (40% of CTC), HRA will be Rs 4 lakh, Special Allowance will be Rs 6.5 lakh and LTA will be Rs 1.5 lakh.
HRA depends on the salary structure, rent and city. Suppose HRA is 50% of the basic salary. In non-metro cities, HRA can be up to 40 percent of the basic salary. But you get tax rebate only up to 10% less than the basic salary you pay.
Suppose you paid a rent of Rs 5 lakh in the whole year. From this, after deducting 10% of the basic salary i.e. Rs 80,000, it becomes Rs 4.2 lakh. Whichever is the lowest among these three, that will be your HRA exemption. That means your HRA exemption is Rs 4 lakh.
After deducting HRA of Rs 4 lakh, LTA of Rs 1.5 lakh and standard deduction of Rs 50,000 from CTC of Rs 20 lakh, your taxable income comes down to Rs 14 lakh.
Apart from this, a deduction of Rs 1.5 lakh can be made annually under section 80C of the Income Tax Act. To avail the benefits of section 80C, you can invest in schemes like PPF, NSC, ELSS and EPF. Under section 80 CCD (1B), your investment in NPS is tax free up to Rs 50,000. Apart from this, you can also claim 10 percent of your basic salary and DA under the employer’s NPS contribution. This exemption is available under section 80 CCD (2B).
Tax deduction can be claimed on medical insurance premium under section 80D. This deduction is up to Rs 50,000 annually for senior citizens and Rs 25,000 for non-senior citizens. Under section 24(b), in the old regime, you can get a deduction of up to Rs 2 lakh on the interest paid on the home loan for your residence.
Under section 80G, you can get a deduction of up to 50% or 100% on donations made to certain charitable organizations. Apart from this, under section 80EEB, you get a deduction of up to Rs 1,50,000 on the interest of the loan taken to buy an electric vehicle.
In this way, out of 14 lakh standard deduction, 1.5 lakh of 80C, 1.3 lakh of NPS (50,000 + 80,000), Rs. 75,000 of medical insurance, Rs. 2 lakh of home loan interest, Rs. 85,000 of education loan, Rs. 10,000 exemption on interest on saving account, Rs. 1 lakh for donation under 80G, Rs. 1.5 lakh exemption on EV loan, total rebate of Rs. 9 lakh.
In this way, now your taxable income has come down to Rs. 5 lakh. In the old tax regime, there is zero tax liability on income up to Rs. 2.5 lakh. Apart from this, there is 5% income tax on annual income of 2.5 to 5 lakh, which amounts to Rs. 12,500.
Rebate is given by the Income Tax Department under Section 87A. In this way, your taxable income is reduced to zero and you will not have to pay income tax.
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