How To Save Entire Tax On ₹15.5 Lakh Income Explained With Example

For many professionals, tax season brings questions about how to reduce liability while staying within the framework of the Income Tax Act. With the new tax regime for FY 2025–26, salaried individuals earning around ₹15.5 lakh annually can explore a number of deductions and exemptions to legally bring their net tax outgo to zero. According to financial planners, a combination of standard deductions, retirement-linked savings, and expense reimbursements can help employees maximise benefits and ensure they remain in a lower effective bracket.

Updated Income Tax Slabs for FY 2025–26

Under the new structure, earnings up to ₹4,00,000 are exempt from tax. Incomes between ₹4,00,001 and ₹8,00,000 are taxed at 5 per cent, while ₹8,00,001 to ₹12,00,000 attracts a 10 per cent rate. Salaries from ₹12,00,001 to ₹16,00,000 are taxed at 15 per cent, while slabs move progressively up to 30 per cent for incomes above ₹24,00,000. Understanding these slabs is crucial before applying deductions, as they determine the marginal rate applicable after all adjustments.

The Role of Standard Deduction

Every salaried taxpayer is entitled to a flat standard deduction of ₹75,000 under the new regime. For someone with a gross income of ₹15.5 lakh, this immediately reduces taxable income to ₹14.75 lakh. Experts say this forms the first step in tax planning, as it applies automatically without requiring additional proof of expenditure.

Using the National Pension System (NPS)

The National Pension System offers a significant deduction on the employer’s contribution. Employees can claim up to 14 per cent of their basic pay, which is a major benefit for long-term financial security. For a basic salary of around ₹7.75 lakh, this translates into a deduction of ₹1.08 lakh, effectively lowering taxable income to ₹13.66 lakh. In addition to tax relief, the NPS also builds a retirement corpus.

Employee Provident Fund (EPF) Contributions

Another critical component is the employer’s share in the Employees’ Provident Fund (EPF). At 12 per cent of basic salary, this works out to approximately ₹93,000 in this scenario. Subtracting this amount further brings down taxable income to ₹12.73 lakh. Financial experts highlight that combining NPS and EPF benefits ensures that employees secure their retirement while reducing their tax obligations in the present.

Leveraging Small Savings Schemes

Beyond retirement-linked accounts, schemes such as the Public Provident Fund (PPF) and Sukanya Samriddhi Yojana (SSY) continue to offer deductions under the new regime. If an individual invests ₹1.5 lakh in PPF and ₹1 lakh in SSY, they could qualify for additional relief, effectively reducing their taxable base by ₹1.75 lakh. In this calculation, the post-deduction income drops close to ₹12.56 lakh.

Workplace Reimbursements and Allowances

According to tax professionals, certain allowances paid by employers for official purposes can also be structured to provide tax relief. These include entertainment expenses, transport reimbursements, fuel bills, and communication allowances. If such claims amount to around ₹1.5 lakh annually, the taxable income reduces further to ₹11.06 lakh. This adjustment effectively places the salary within the tax-free threshold of ₹12 lakh, ensuring no tax liability under the new framework.

Importance of Planning Throughout the Year

Experts advise that waiting until the last minute before filing returns often limits the options available to employees. By planning investments and reimbursements early in the financial year, taxpayers can ensure they capture the full range of benefits available to them. They also recommend maintaining proper documentation, especially for reimbursements and savings scheme contributions, to avoid complications during assessment.

While the new regime eliminates many of the older exemptions, it still offers salaried individuals several avenues to reduce taxable income if approached strategically. For those earning around ₹15.5 lakh annually, thoughtful use of deductions such as NPS, EPF, PPF, and official reimbursements can legally lower tax liability to zero.

Disclaimer: This article is for informational purposes only and should not be treated as professional financial advice. Tax rules may change, and individuals are encouraged to consult qualified experts before making any investment or planning decisions.