In the Budget 2025–2026, Finance minister Nirmala Sitharaman gave the taxpayers a significant gift. Up to Rs 12 lakh in annual income is now tax-free. However, by utilizing certain concessions, this income cap can be raised to Rs 17 lakh if your employer modifies your pay scale.
 
The Income Tax Act states that some allowances are exempt from taxes under the new tax structure if specific requirements are fulfilled. Taxpayers can lower their tax bills with these allowances.  Your yearly income up to Rs 17 lakh can be tax-free in the fiscal year 2026 if you alter your pay structure.

How it is possible?
According to experts, several provisions in the Income Tax Act can assist taxpayers in restructuring their pay structure under the new tax regime.  Under the New Tax System, certain allowances are tax-free provided certain requirements are fulfilled.  Under the new tax structure, these allowances might assist the taxpayer in lowering their taxable income.
 
Bills for phones and mobile devices
 
A salaried worker is eligible for a deduction from his own phone and cell phone costs.  This has no boundaries.  Employees can therefore receive tax exemption if they modify their pay structure to incorporate their internet, phone, and mobile expenditures.

Allowance for Special Employee Transportation
 
Specially abled individuals are entitled to a tax-free transportation allowance under the Income Tax Act.  This covers travel expenses from home to work in addition to other expenses.  A discount of Rs 3,200 per month or Rs 38,400 per annum is offered on the transport allowance given to able-bodied employees.  Please be aware that the only employees who are eligible for this exemption are those who are blind, deaf, or mute, or who have an orthopedic impairment that affects their lower extremities.

Vehicle Compensation
 
One benefit that employers offer their workers in exchange for their labor is vehicle reimbursement.  This is not the same as the transport allowances that employees with special needs can receive.  The perk value of the car that the business provides for the employee's official and personal use is extremely minimal, per the Income Tax regulations.

Know the complete calculation of saving tax -
Component Annual (B @ 30%) Annual (B @ 40%)
Basic 5,17,315 7,13,992
HRA 2,58,658 3,56,996
Special Allowance 4,99,027 2,04,011
Mobile Reimbursement 50,000 50,000
Vehicle Reimbursement 2,40,000 2,40,000
Employer's NPS Contribution 72,424 99,959
Gross Pay 16,37,424 16,64,959
Employer's EPF Contribution 62,078 85,679
Gratuity 24,883 34,343
Total CTC 17,24,385 17,84,981
 
 

 
 
 
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SIBY JEYYA

12/03/2025 08:05 AM