Can tax be zero even on a salary of 14.65 lakhs? In the new tax rules, you can save the entire tax with just three exemptions. Know what these exemptions are and how your taxable income will be reduced.
The Income Tax Department has notified all the Income Tax Return (ITR) forms for the assessment year 2025-26. The process of filing ITR is also expected to start soon. The salaried class is also planning to reduce tax liability. However, if your annual CTC is ₹ 14.65 lakh, then you can make your tax liability zero without much brainstorming.
How will the tax liability be zero?
According to Taxbuddy, suppose the CTC of an employee is Rs 14.65 lakh. Out of this, 50% is the basic salary and the remaining 50% is divided into different allowances and other items. Tax deduction is calculated on the basis of basic salary. The breakup of deductions is as follows:
Exemption on EPF contribution: If the company deposits 12% of the basic salary in the Employees Provident Fund (EPF), then this amount comes under the purview of tax exemption. This amount will be Rs 87,900.
Exemption on company contribution to NPS: The company’s 14% contribution to NPS is also considered tax free, under section 80CCD (2). This amount is Rs 1,02,550.
Standard deduction: In the new tax regime, a standard deduction of ₹ 75,000 is available to all salaried persons. That is, this amount will be directly reduced from your tax liability.
After combining all these deductions, the employee’s taxable income comes down to ₹ 11,99,550. Since Finance Minister Nirmala Sitharaman has made income up to Rs 12 lakh tax free in Budget 2025, there will be no income tax liability on this employee.
It is worth noting here that in the new tax system, deduction is allowed on the company’s NPS contribution under section 80CCD (2). At the same time, EPS i.e. Employee Pension Scheme also comes under the tax exemption under 80CCD (1). However, there will be no tax exemption on your contribution.
What would have been the liability in case of no tax exemption?
If all these exemptions were not applicable, then according to the new tax regime, a total income tax liability of up to ₹ 88,500 would have been created on a salary of Rs 14.65 lakh. Let us understand this tax calculation:
- 5% on income of ₹4–8 lakh = ₹20,000 tax
- 10% on income of ₹8–12 lakh = ₹40,000 tax
- 15% on income of ₹12–14.65 lakh = ₹28,500 tax (after standard deduction)
Note: This tax calculation is based on certain parameters. Your tax liability may vary depending on your salary structure.
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