How to Maximize Savings Under the New Tax Regime
With strategic deductions, salaried individuals earning up to ₹14.65 lakh can legally pay zero tax under the new tax regime for 2025-26. While the new regime eliminates several deductions, smart planning can help taxpayers keep more money in their pockets.
How to Pay Zero Tax on ₹14.65 Lakh Salary?
Tax expert Abhishek Soni, CEO and Co-founder of Tax2win, explains how a structured salary can help taxpayers achieve zero tax liability. Here’s a breakdown:
- Annual CTC: ₹14,65,000
- Basic Salary (50% of CTC): ₹7,32,500
- NPS Employer Contribution (14% of Basic Salary): ₹1,02,550
- EPF Employer Contribution (12% of Basic Salary): ₹87,900
- Standard Deduction: ₹75,000
- Taxable Income (After Deductions): ₹11,99,550
With these deductions, taxable income falls below ₹12 lakh, qualifying for a full tax rebate under the new regime.
Key Deductions to Pay Zero Tax and Maximize Savings
1. National Pension Scheme (NPS) Contribution
Employers’ contributions to NPS under Section 80CCD(2) are tax-free. The new regime allows employers to contribute up to 14% of the basic salary, making this a significant tax-saving tool.
2. Employee Provident Fund (EPF) Contributions
Employers’ 12% EPF contribution (on basic salary) remains tax-free, providing additional savings.
3. Standard Deduction
The Budget 2024 increased the standard deduction from ₹50,000 to ₹75,000, offering a flat tax reduction for salaried individuals.
Why This Works in the New Tax Regime
- Higher Tax Rebate: The rebate limit has increased from ₹7 lakh to ₹12 lakh, benefiting middle-class earners.
- Employer Contributions Remain Tax-Free: Contributions to NPS, EPF, and gratuity are fully exempt.
- Simplified Tax Filing: While the new regime removes popular exemptions like HRA, LTA, and home loan interest, it simplifies taxation and lowers rates.
Important Budget 2025 Update
Union Finance Minister Nirmala Sitharaman announced that individuals earning up to ₹12 lakh (or ₹12.75 lakh with standard deduction) will pay zero tax under the new tax regime. With additional employer contributions to NPS and EPF, this threshold effectively increases to ₹14.65 lakh.
Final Thoughts
Although the new tax regime eliminates several deductions, strategic planning can help salaried individuals legally pay zero income tax on ₹14.65 lakh. Understanding employer benefits like NPS and EPF contributions is key to optimizing tax savings.
Disclaimer: The above information is based on expert analysis and should be verified with a certified tax professional before making financial decisions.