₹14.65 lakh salary? Here's how you can legally reduce your income tax liability to zero under new tax regime

Many salaried individuals assume that earning more than ₹12 lakh automatically means they have to pay income tax under the new tax regime. However, that's not always true.

If your annual Cost to Company (CTC) is ₹14.65 lakh, you may still be able to reduce your taxable income below ₹12 lakh and legally bring your income tax liability down to zero, provided your salary structure includes eligible employer contributions.

Here’s how the calculation works to bring tax liability down to zero for FY 2026–27 under the new tax regime.

How can a ₹14.65 lakh salary become tax-free?

Let's assume:

• Annual CTC: ₹14,65,000
• Basic salary: ₹7,32,500 (Assume this to be 50% of CTC)

Under the new tax regime, two employer contributions can reduce your taxable income.

• Employer's NPS contribution (up to 14% of basic salary) is deductible.
• Employer's EPF contribution (12% of basic salary) forms part of retirement benefits and reduces taxable salary under this salary structure.

In addition, every salaried taxpayer under the new regime gets a standard deduction of ₹75,000.

How your tax liability becomes zero in the new regime?

The main point is to reduce the net taxable income below ₹12 lakh. Under the new tax regime, individuals with taxable income up to ₹12 lakh can effectively pay zero income tax because of the ₹60,000 rebate available under Section 87A.

In this example:

• Taxable salary after standard deduction = ₹13.90 lakh
• Less employer EPF and employer NPS contributions = ₹1.90 lakh
• Final taxable income = ₹11,99,550

Since the taxable income falls below ₹12 lakh, the tax liability becomes nil.

What is the role of employer NPS and EPF contributions?

A major factor behind this tax saving is your employer's contribution to retirement benefits.

• Under Section 80CCD(2), an employer's contribution to an employee's National Pension System (NPS) account is eligible for a tax deduction under the new tax regime.
• For all categories of employers, the NPS deduction is available for contributions of up to 14% of the employee's salary (basic salary plus dearness allowance). Since this contribution is made by the employer, it helps reduce the employee's taxable income, thereby lowering the overall tax liability.
• Employer contribution to EPF also forms part of the retirement savings structure. In salary packages where this component is structured appropriately, it can easily contribute to lowering the employee's taxable salary.

What are the key points to remember?

Keep these points in mind:

• The example assumes basic salary is 50% of CTC.
• Employer NPS contribution is calculated at 14% of basic salary.
• Employer EPF contribution is assumed at 12% of basic salary.
• If your employer does not offer NPS or has a different salary structure, your taxable income and final tax liability may differ.

Disclaimer: This is only for informational and educational purposes. Please consult a qualified tax expert for the latest tax laws and regulations.