Earning ₹13.25 lakh? Here's how deductions under the old tax regime can bring your taxable income to zero

This is the time of year when taxpayers must choose between the old and new tax regimes. Many continue to invest in tax-saving instruments, plan for retirement through the National Pension System (NPS), and manage home loan commitments.

Rakesh Kumar, a Delhi-based salaried individual living on rent, finds himself weighing these options. With a taxable income of ₹13.25 lakh (where the basic component of the salary is ₹ 6 lakh), he wonders if it is possible to reduce his tax liability to zero through smart planning and strategic use of deductions. From the standard deduction and House Rent Allowance (HRA) exemptions to NPS contributions, Section 80C investments, health insurance under Section 80D, and home loan interest under Section 24(b)—each deduction plays a vital role in optimising his tax outgo.

Reply by CA (Dr.) Suresh Surana

Let’s break down how these deductions work together to effectively reduce your taxable income from ₹13.25 lakh to ₹5 lakh—and then, zero.

The older tax regime offers considerable flexibility for taxpayers by enabling them to leverage available claims of exemptions and deductions fully. Even with a gross salary of ₹13,25,000, the individual can effectively reduce their taxable income by strategically using deductions like HRA, NPS, 80C, 80D, and housing loan interest.

As per the old tax regime, a salaried individual with a gross salary income of Rs. 13,25,000 can effectively reduce their taxable income to Rs. 5,00,000 in order to ultimately bring their tax liability to NIL by strategically availing various deductions and exemptions such as standard deduction u/s 16(ia), HRA exemption, interest on a housing loan under section 24(b), deductions under Chapter VI-A such as Section 80C, 80D, and 80CCD(1B) for NPS contributions.

Once the taxable income is brought down to Rs. 5,00,000, a rebate under Section 87A fully offsets the tax liability. This clearly highlights the advantage of the old regime for taxpayers who have significant eligible deductions, offering substantial tax relief through efficient planning.

Disclaimer: Expert opinions and illustrative figures are provided for informational purposes only. Actual results may vary based on individual investment choices. These views do not represent Fortune India.