Tax savings in 2025: You can have zero income tax on Rs 17 lakhs salary; Salary breakups explained

Written by – Jaya Pathak

The union budget of India has introduced major changes in the income tax regime offering substantial relief to the salaried individual. One of the most notable changes is the potential zero income tax on a gross annual salary of seventeen lakh rupees.

Finance minister Nirmala Sitharaman introduced a new provision which allows the individuals whose annual income is up to rupees twenty lakh rupees have to pay zero tax. But the individuals with salary exceeding rupees ₹15,00,000 are still pondering whether they can avail tax savings under the new tax regime which minimizes exemptions and deductions.

It Is to be noted that a tax free limit can be raised to rupees ₹17,00,000 by utilizing certain allowances, provided that adjustments are made to their salary structure by their employer. According to the income tax law, there are certain allowances which are exempted from income tax under the new tax regime. These allowances are subject to meeting specific requirement and have the potential to assist the taxpayers in reducing the overall tax burden.

 As per the Income Tax Act of 1961, the taxpayers can adjust salary structure by utilizing certain specific allowances which has been provided in the Income Tax Act. These allowances are eligible for tax exemption under the new regime as long as a specific criterion is being satisfied. By taking advantage of these allowances, the taxpayers can lower their taxable income under the updated tax laws.

Understanding salary structure and tax slabs

Let us take certain assumptions to achieve zero tax on a salary of rupees 17,00,000.

1. You should be working in a different city other than where your house is located. You have two children and the employer is supporting restructuring of your salary to include eligible allowances.
2. You can take up to rupees ₹9600 exemption and money for the education and hostel fees for two children. The children’s education allowance is exempted for two children at hundred rupees per month per child which gives an annual exemption of Rs 2,400. When two children are assumed to be staying at hostel then the expenditure allowance is given to the extent of rupees 30 per month which gives an exemption of Rs 7200.
3. A food voucher of rupees 50 per meal is provided during office hours.
4. Leave travel allowance can be availed twice in a block of four years. It is exempted under section 10(5) In the hands of employee subject to the conditions specified therein.
5. Gifts under Rs 5000 remain tax free from employers.
6. A standard deduction of rupees 50,000 is available straight away under section 16(ia).
7. You can stick to the old regime.

How can you save taxes on of seventeen lakh rupees salary in 2025?

With the introduction of newer ways to maximize the saving under the Income Tax Act 1961, if your salary is Rs 17,00,000 annually then you can pay 0 income tax by following means: –

1. You can adjust your salary structure by utilizing various allowances like children’s education allowance, postal allowance, leave travel allowance and food vouchers.
2. You can make a standard deduction of rupees fifty thousand rupees and take the advantage of professional tax benefits.
3. You can invest Rs 1.5 lakh under section 80C and 75,000 in medical insurance.
4. You can take others reimbursements for Internet bills, car lease benefits and transport allowance.

What are these smart allowances to slash your income tax in 2025?

Apart from your basic salary, there are several allowances and reimbursements which can help you to save taxes legally. Some of them are listed below-

• A full exemption on mobile and Internet bill is provided with no upper limit as long as it is reasonable for your job.
• Car lease programs are available OHS taxable value is quite low.
• A transport allowance for specially abled person is provided up to Rs 38,400 which is tax free amount annually.
• By providing the receipts, you can get tax exemptions beyond the standard transport allowances.

Conclusion

You can make a strategic move by planning salary and coordinating with your employers. With right reimbursement and smart investment, you can enjoy financial freedom and take-home salary. You must stay updated with the latest tax policies and start planning your salary structure.