If your salary is Rs 1 lakh monthly, then you can choose either the New Tax Regime or the Old Tax Regime. However, if you want to pay ‘0’ tax on a salary of Rs 1 lakh, that is, you do not want to pay a single rupee tax, then you should select the OLD TAX REGIME.
Finance Minister Nirmala Sitharaman announced tax exemption in the budget on Tuesday, 23 July. She increased the standard deduction from Rs 50,000 per annum to Rs 75,000 per annum. Along with this, the tax structure was also revised. This change was made under the New Tax Regime. In such a situation, people are very confused about tax saving that if their salary is Rs 50,000 or Rs 1 lakh, then which tax regime should they choose. Also, how much tax will have to be paid? Let’s understand what the whole math is.
First of all, know that the new tax regime is the default since Budget 2023, that is, if you do not select any regime, then the new tax regime will be already selected. In such a situation, if your salary is Rs 50,000, then you do not need to take any tension, because your annual salary is only 6 lakhs. This means that you do not fall in the tax category.
Which tax regime is better for a salary of 1 lakh?
Now let’s come to the salary of 1 lakh… If your salary is Rs 1 lakh monthly, then you can choose either the new tax regime or the old tax regime. However, if you want to pay ‘0’ tax on a salary of 1 lakh, that is, you do not want to pay even a single rupee tax, then you will have to select OLD TAX REGIME, but for this you will have to show some claim, so that you can get tax exemption.
How will ‘0’ tax be levied on a salary of 1 lakh?
If you want to pay 0 tax on a salary of 1 lakh, then you will have to claim tax exemption on many types of investments and reimbursement. Conveyance, LTA, entertainment, broadband bill, petrol bills and entertainment or food-coupons can also be claimed in reimbursement.
First of all, let’s talk about LTA. You can avail this benefit twice in 4 years. This includes the fare of the travel plan. This is 10 percent of your basic salary. This means that on your annual salary of Rs 12 lakh, the basic salary will be 6 lakh annual salary. That means, LTA will be Rs 60,000 and an average of Rs 30,000 can be claimed as exemption.
HRA is given at the rate of 50% in metro cities and 40% in non-metros. The amount that remains after deducting 10% of the basic salary from the total rent can be claimed as HRA. In such a case, people living in metro cities can claim HRA exemption of Rs 1.80 lakh on the basis of monthly rent of Rs 20,000.
How much exemption can be claimed in reimbursement?
On a monthly salary of Rs 1 lakh or an annual salary of Rs 12 lakh, conveyance allowance of Rs 1-1.50 lakh is available, which means that this amount is completely non-taxable.
You can claim tax exemption on monthly broadband bill of Rs 700-1000, which means you can claim tax exemption of Rs 12,000 annually.
Those earning a salary of Rs 1 lakh are given entertainment allowance of Rs 2000 every month, which means you can claim tax exemption of Rs 24,000 annually under this.
Many companies give allowance on uniforms, books or petrol bills. Which means you can get exemption of up to Rs 12,000 annually under this.
Now you can get tax exemption of up to Rs 1.98 lakh under total reimbursement.
How much exemption will you get on investment? (Savings deduction)
- By investing in places like EPF, PPF, Sukanya Samriddhi Yojana, NPS, child’s tuition fees, LIC, home loan principal, you can get a tax exemption of Rs 1.5 lakh per year under Income Tax Section 80C.
- By investing in NPS under Section 80CCD (1B), you can claim an extra tax exemption of Rs 50,000.
- Under Section 80D, you can get a tax exemption of Rs 25,000 on health insurance and Rs 25,000 on parents’ health insurance, i.e. a total of Rs 50,000 can be availed as tax exemption.
- Now the exemption on total investment will be Rs 2.50 lakh.
Now if you add the tax claim, the taxable income will be this much
| Total HRA claim | 1.80 lakhs of Rs |
| Total Reimbursement | 1.98 lakh rupees |
| Deduction on investment | Total Rs 2.50 lakh |
| standard deduction | Rs 50,000 |
| Exemption under LTA | 30 thousand rupees |
| Total tax exemption | It will be Rs 7.08 lakh. |
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