Zero income tax on Rs 15 lakh CTC ?
A lot of salaried individuals are now leaning towards the new tax regime for its lower tax rates since income up to Rs 12.75 lakh can effectively become tax-free under the same.
With the New Income Tax Rules 2026, coming into play for Tax Year 2026-27, taxpayers who file their ITR on or before July 31, 2027, can also enjoy many tax benefits through certain perks and allowances, which were not previously available under the new regime.
In fact, it may even be possible to bring your tax liability down to zero on a Rs 15 lakh CTC under the new tax regime with the right combination of reimbursements, allowances and perquisites.
How Rs 15 lakh CTC can result in zero tax under the new tax regime
Here is an illustrative example of how, at a CTC of Rs 15 lakh, a few allowances and perquisites can increase tax efficiency under the new income tax regime.
Gadget allowance (official use)
Employer-provided gadgets used for official work continue to receive favourable tax treatment under the new tax regime.
“Laptops, computers, tablets and mobile phones provided by employers for use to the employee for official purposes are not taxable as perquisite,” says Neeraj Agarwala, Senior Partner, Nangia & Co LLP.
Telephone/internet reimbursement
Telephone and internet reimbursements for official use are fully exempt from tax under both old and new tax regimes in India, provided they are based on actual bills submitted to the employer.
When asked about telephone/internet reimbursement, Agarwala explains that telephone expenses are not included in the computation of income from salary.
Car Perquisite (official use)
As explained by Agarwala, the taxability of expenses incurred for running and maintenance of a car in the hands of the employee will depend on the use and ownership of such a car.
In case car is owned by the employee:
Where cubic capacity of engine does not exceed 1.6 litres, or the motor car is an electric vehicle: actual expenditure incurred by the employer as reduced by ₹ 5,000 + ₹ 3,000 (if a driver is provided by the employer)
Where cubic capacity of engine exceeds 1.6 litres: actual expenditure incurred by the employer as reduced by ₹ 7,000 + ₹ 3,000 (if a driver is provided by the employer)
In either situation, the employee must maintain complete details of the journey undertaken for official purpose which may include date of journey, destination, mileage and the amount of expenditure incurred thereon; and the employee should give a certificate to the effect that the expenditure was incurred wholly and exclusively for the performance of official duties, he adds.
Additional allowances that can still reduce tax
Some allowances continue to offer tax relief under specific conditions even in the new tax regime.
Conveyance allowance
Conveyance allowance for commuting between the place of the employee’s residence and the place of duty is taxable under the new tax regime.
“A fixed conveyance allowance given to an employee to meet his expenditure for the purpose of commuting between the place of his residence and the place of his duty is taxable. However, any allowance granted to meet the expenditure incurred on conveyance in performance of duties is exempt from taxation under the new tax regime,” says Agarwala.
Employees must bear in mind that this exemption is available on actual expenditure incurred by the employee on conveyance, who should submit bills for travel or fuel to avail this exemption, he adds.
Transport allowance for disabled employees
Transport allowance continues for employees with disabilities under the new tax regime.
As explained by Agarwala, this allowance is granted to an employee, who is blind or deaf and dumb or orthopaedically handicapped with disability of lower or upper extremities, to meet his expenditure for the purpose of commuting between the place of his residence and the place of his duty and is allowed as a deduction under the new tax regime the following way:
- Metro cities: ₹15,000 plus dearness allowance thereon per month
- Other cities: ₹8,000 plus dearness allowance thereon per month
Publication – The Economic Times
By Neeraj Agarwala
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