Income Tax: You won't have to pay income tax even on a salary of Rs 15 lakh; this trick will save you money..

The year 2026 has begun. Soon, the Income Tax Department will start releasing the ITR forms. Under the new tax regime, if your annual salary is up to ₹12 lakh, you don't have to pay any tax. However, if your income is higher than that, the Income Tax Department provides a special exemption. This is called 'Standard Deduction', which is ₹75,000. This exemption is available under Section 115BAC(1A)(iii) of the Income Tax Act, 1961.

If your income exceeds ₹12.75 lakh, then you have to pay tax. But there is another way to keep your income tax-free, even under the new tax regime. According to the Economic Times, if your employer (company) allows you to contribute to both the Employee Provident Fund (EPF) and the National Pension System (NPS), you can make your salary up to ₹14.66 lakh tax-free.

How to make your income tax-free?
To make an income of approximately ₹15 lakh (₹14.66 lakh) tax-free, it is essential that your company is a part of both EPFO ​​and NPS and allows you to contribute to them. Even if your company provides tax benefits for EPF contributions but not for NPS, you can still make your salary of ₹13.56 lakh tax-free under the new tax regime.

How is the exemption received?
Gaurav Makhijani, Managing Partner of Makhijani Gera & Associates LLP, explains that for those who choose the new tax regime, there is no exemption under Section 80C for the money contributed as an employee to the EPF. This is different from the old tax regime, where contributions to EPF were eligible for exemption under Section 80C. Makhijani says, "Here, the employer's contribution to EPF, up to 12% of the basic salary and dearness allowance (DA), remains tax-free under both tax regimes (old and new). However, this must be within the overall limit of Rs. 7.5 lakh, which applies to both the old and new tax regimes."

Makhijani further explains that in the case of NPS, there is no tax exemption on the employee's own contribution under the new tax regime. However, the employer's contribution, which can be up to 14% of the basic salary and dearness allowance, remains tax-free under both the old and new tax regimes.

How to make a Rs. 15 lakh salary tax-free
Let's assume your total salary is Rs. 14.66 lakh.
Your basic salary is Rs. 7.33 lakh (50% of Rs. 14.66 lakh).
Your employer contributes 12% of your basic salary to EPF, which is approximately Rs. 87,960. This is tax-free.
Your employer contributes 14% of your basic salary to NPS, which is approximately Rs. 1,02,620. This is also tax-free.
In addition, a standard deduction of Rs. 75,000 is also available under the new tax regime.

Now let's calculate:
Total salary: Rs. 14,66,000
Employer's EPF contribution (tax-free): Rs. 87,960
Employer's NPS contribution (tax-free): Rs. 1,02,620
Standard deduction: Rs. 75,000
Total savings: Rs. 2,65,580

Your taxable income (the amount on which tax will be levied) is reduced in this way. If we consider these exemptions, your effective taxable income is significantly reduced, making your salary of ₹14.66 lakh tax-free.

A large fund for retirement
EPF and NPS are not just for saving on taxes, but they also help you build a substantial fund for your retirement in the long run. If a 25-year-old starts contributing ₹10,000 per month to NPS and increases this amount by 5% every year, and continues contributing until the age of 60, assuming an annual return of 12%, they can accumulate a substantial fund of ₹8.62 crore.

Similarly, if a 25-year-old starts contributing ₹10,000 per month to EPF, increases this amount by 5% every year, and earns an interest of 8.25%, they can build a fund of approximately ₹4.05 crore.

Disclaimer: This content has been sourced and edited from Navbharat Times. While we have made modifications for clarity and presentation, the original content belongs to its respective authors and website. We do not claim ownership of the content.