The current state of the law does not offer a fully tax-free figure of Rs 19 lakh, however, under the new rates and by taking advantage of the exemptions and deductions, tax liability can be brought down to zero on the income of many taxpayers in certain situations. The notion that one does not pay any tax on the income of Rs 19 lakh is often made on the assumption that he/she is taking benefit of the new regime slabs, standard deductions, and other perquisites which are not always true to all. Such claims should be carefully read and the state of the conditions under which a tax is planned must be comprehended.

New vs old tax regime

In the new structure, individual taxpayers will have the option of the new regime (low slab rates and fewer deductions) and the old regime (high slab rates and more deductions). The tax free income limits vary with the regime of choice, age of the tax payer and deductions actually realized. The effective zero tax rate of most salaried people will be way below Rs 19 lakh unless they have a set of very specific requirements.

Under the new regime the basic exemption and slab will permit tax relief until a set amount of income and a rebate will be provided up to a given limit and the basic band of income will be taxed at zero. Zero tax claims on a Rs 19 lakh, usually based on adding slab benefits and maximum deductions or rebates and may assume a situation which does not always apply to all taxpayers.

How “near zero” tax is achieved

To minimize the tax liability to zero at higher levels of income, which is usually the case in the case of many people earning salaries, applies a combination of the following:

Salaried employees are allowed a standard deduction (under either regime).

Investment under section 80C like EPF, PPF, ELSS, and premiums on life insurance, principal of home loan etc.

The contribution to NPS (Section 80CCD), the contribution to health insurance (Section 80D) and interest on a property loan (Section 24 under the old regime).

With a mix of these deductions, taxable income would reduce substantially under the old regime but not to zero at maximum Rs 19 lakh as it is in reality with most people. With the new regime, the deductions are limited in most cases and thus the ability to deduct to the zero taxable income at such level is further curtailed.

The claim that taxes will not be charged on the amount more than 19 lakh is misleading.

Articles, videos, or social media posts that indicate that there will not be any tax payable on an earning of Rs 19 lakh is normally a hypothetical scenario or one that is highly optimised. They may assume:

• Deductions as much as possible in any section.
• Maximum utilisation of home loan interest.
• More retirement and medical benefits at upper limits.

In practice such perfect optimisation is hardly realised on the part of the average taxpayer. Perceiving this statement as a blanket rule may result in underrating the tax liability and potential future demand, interests, and penalty.

Guidance that is practical to the taxpayers.

Taxpayers should:

• Compare the old and new regime very carefully based on their salary structure, investments, and loans.
• Estimate actual tax on income of about Rs 19 lakh with the help of an updated tax calculator or a professional.
• Do not use the so-called blanket arguments of 0 tax up to 19 lakh but in fact calculate it through actual amounts and possible deductions.

To determine the actual tax effect on an income of between Rs 19 lakh and above, it needs a personalised calculation before committing an investment or making returns.