How to Pay Zero Income Tax on a ₹17 Lakh CTC Under the New Regime Post-Budget 2025

With Budget 2025 introducing a more streamlined New Income Tax Regime starting April 1, 2025, individuals with an annual taxable income of up to ₹12 lakh now fall into the zero-tax bracket. But what if your cost-to-company (CTC) is closer to ₹17 lakh? You might still be able to pay zero tax if you restructure your salary smartly.

Understanding the New Regime

Under the revised regime, many exemptions and deductions of the old system are removed, but a few strategic allowances and reimbursements still offer ways to reduce your taxable income legally and effectively.

Let's take a look at how salary restructuring can bring your net taxable income below ₹12 lakh, even with a higher CTC.

Key Tax-Free Components to Consider

1. Conveyance Reimbursement

• Fully tax-exempt if expenses are for commuting to work and bills are submitted.
• Annual potential: ₹2.4 lakh

2. Transport Allowance (Specially-abled individuals only)

• Exemption up to ₹3,200/month (₹38,400/year) for certain disabilities.

3. Telephone & Internet Bill Reimbursements

• No specific exemption cap, but must be reasonable and justifiable per your job role.
• Typically allows reimbursement of around ₹50,000/year

4. Car Leasing

• When a company-provided car is used for both personal and professional purposes, the perquisite value is minimal.
• ₹1,800/month for smaller engines
• ₹2,400/month for larger engines
• ₹900/month if a driver is provided

A ₹17 Lakh CTC Breakdown: Two Scenarios

Here's how two salary structures with basic pay at 30% and 40% of CTC help bring taxable income down:

Resulting Net Taxable Income (Both Scenarios): ₹12,00,000

Through strategic use of:

• Reimbursements (Phone + Conveyance)
• Standard Deduction (₹75,000)
• Employer’s NPS contribution (up to 14% of basic)

Smart Salary Structuring

While the new regime limits many traditional exemptions, smart salary structuring still allows high-earning employees to minimise or even eliminate their tax liability. Key strategies include leveraging reimbursements, car lease benefits, and employer NPS contributions. However, these calculations do not include other income sources (e.g., interest, dividends), which may affect your actual taxable income.

Read More: ITR Filing FY26: Is Dearness Allowance (DA) Taxable?

Conclusion

While the new income tax regime post-Budget 2025 limits several traditional deductions, it still offers room for tax optimisation through strategic salary restructuring. However, this approach requires careful planning, timely documentation, and an understanding of the exemptions permitted under the regime.

It’s also important to account for other income sources, which could influence final tax liability. Consulting a tax advisor can help tailor these strategies to individual financial situations for optimal results.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions.

Investments in the securities market are subject to market risks, read all the related documents carefully before investing.