Have a CTC of Over Rs 17 Lakh? You Can Still Pay Zero Tax – Know How!

Understanding the New Tax Regime

Under the new tax regime, if your taxable income is up to Rs 12 lakh, you won’t have to pay any tax. But what if your income exceeds this threshold? The answer lies in restructuring your salary by making the most of exemptions and allowances. With a thoughtful approach, you can ensure that after deductions and reimbursements, your net taxable income remains at or below Rs 12 lakh.

Key Allowances to Lower Your Taxable Income

Several allowances in the Income Tax Act, if utilized correctly, can help reduce your taxable income. Here are some of the major ones:

1. Conveyance Reimbursement

Employers can reimburse you for travel expenses incurred while commuting to work. If you submit the required bills, this amount remains tax-exempt. This is a straightforward way to reduce your taxable salary without compromising your travel needs.

2. Transport Allowance for Specially-Abled Employees

For employees with disabilities (such as blindness, hearing impairment, or orthopedic issues), a special transport allowance is available. This allowance is exempt up to Rs 3,200 per month (Rs 38,400 per annum), ensuring that these individuals receive additional support without increasing their tax liability.

3. Telephone and Mobile Reimbursements

Modern work demands staying connected, and many employers offer reimbursements for telephone and mobile bills. As long as the amounts are reasonable and supported by bills, these reimbursements are tax-exempt. Some companies even extend this to cover internet expenses, making it an excellent way to reduce your taxable income.

4. Employer’s Car Lease Policy

If your employer provides a car for both personal and official use, the perquisite value of this benefit is calculated at a much lower rate than the actual expenditure. For example, if the engine’s cubic capacity is 1.6 litres or less, the taxable value is only Rs 1,800 per month (plus an additional Rs 900 if a chauffeur is provided). For engines above 1.6 litres, it’s Rs 2,400 per month (plus Rs 900 for a chauffeur). This can be a significant tax-saving benefit if you’re in a higher tax bracket.

Below is a simplified table summarizing the car lease policy perquisite values:

Engine Capacity	Taxable Value (per month)
Up to 1.6 litres	Rs 1,800 (+ Rs 900 if chauffeur provided)
Above 1.6 litres	Rs 2,400 (+ Rs 900 if chauffeur provided)

Case Study: How Salary Restructuring Can Bring Taxable Income Below Rs 12 Lakh

Let’s look at two hypothetical examples to understand how you can use these reimbursements and deductions to lower your taxable income.

Case Study Table: Salary Restructuring

Component	Amount (@30% Basic)	Amount (@40% Basic)
Gross Pay	Rs 16,37,424	Rs 16,64,959
Less: Mobile Reimbursement	Rs 50,000	Rs 50,000
Less: Conveyance Reimbursement	Rs 2,40,000	Rs 2,40,000
Net Pay	Rs 13,47,424	Rs 13,74,959
Less: Standard Deduction	Rs 75,000	Rs 75,000
Net Taxable Salary	Rs 12,72,424	Rs 12,99,959
Less: Employer's NPS Contribution	Rs 72,424	Rs 99,959
Final Net Taxable Income	Rs 12,00,000	Rs 12,00,000

As shown, by incorporating mobile and conveyance reimbursements, claiming the standard deduction of Rs 75,000, and deducting the employer’s NPS contribution, the taxable income can be brought down to the Rs 12 lakh threshold, thereby saving tax.

How Much Tax Can You Save?

The effectiveness of these allowances is evident when you see how even individuals with a high CTC can have their taxable income reduced to Rs 12 lakh. This means that despite a CTC of over Rs 17 lakh, you might end up paying zero tax if your salary is structured correctly. Keep in mind that other incomes like dividends or interest might alter these calculations, so it’s essential to factor in your entire income scenario.

Final Thoughts

Tax planning is a crucial part of financial management, especially in the new tax regime. By understanding the various allowances available—such as conveyance, transport, mobile reimbursements, and car lease policies—you can tailor your salary structure to maximize tax exemptions. This strategy not only reduces your tax burden but also ensures that your hard-earned money is used wisely to secure your financial future.

If you’re earning a high CTC and worried about taxes, consider revisiting your salary structure with your employer. With proper planning and the right documents, you can optimize your taxable income and enjoy significant tax savings. Remember, smart tax planning today can pave the way for a more secure tomorrow!

Also Read: Types of Insurance Policies in India: Choose the Best for Your Needs