Not just Rs 12 Lakh: How Rs 14.65 lakh salary can be tax-free from this year

Tax-free salary: Your salary isn’t tax-free only up to ₹12 lakh anymore. With the right structuring, even a Cost to Company (CTC) of ₹14.65 lakh can result in zero tax liability under the new tax regime. The key lies not in additional deductions—but in how your salary is designed.

Most taxpayers assume that the new regime offers limited relief, with only the ₹75,000 standard deduction available. While that’s partially true, it misses a critical component: employer contributions to retirement benefits, which remain highly tax-efficient. Here’s where the strategy comes in.

NPS

First, employer contribution to the National Pension System (NPS) is a powerful lever. Under the new tax regime, contributions of up to 14% of your basic salary plus dearness allowance (DA) are allowed as a deduction under Section 80CCD(2). This is over and above the standard deduction and does not fall under the ₹1.5 lakh cap of Section 80C. If your HR structures your salary to maximize this component, it can significantly reduce your taxable income.

EPF

Second, employer contribution to the Employees’ Provident Fund (EPF) also play a role. Contributions up to 12% of basic salary plus DA are exempt from tax, subject to overall limits. While this is a standard feature in most salary structures, its tax efficiency is often overlooked when evaluating the new regime.

When these two components — NPS and EPF — are optimally utilized, they can meaningfully bring down your taxable income. Combine this with the ₹75,000 standard deduction, and the effective taxable salary can drop below the threshold where tax liability becomes zero.

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Salary structure

For instance, in a ₹14.65 lakh CTC structure where basic salary is assumed at 50%, employer contributions to EPF and NPS can together exceed ₹1.9 lakh. After factoring in the standard deduction, the net taxable income can fall close to or below ₹12 lakh — effectively eliminating tax liability under current slabs.

 

However, this outcome is not automatic. It depends heavily on salary structuring and employer flexibility. This is why a practical step for salaried individuals is to actively engage with their HR or compensation team. Ask whether your salary can be structured to include the full eligible employer contribution to NPS (up to 14%) and ensure EPF contributions are optimized.

It’s also important to understand that this is not a loophole — it is a legitimate use of provisions built into the tax framework to encourage long-term retirement savings.

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That said, this strategy comes with trade-offs. Higher allocation to retirement components like NPS reduces immediate take-home salary and locks funds until retirement, limiting liquidity. Therefore, it works best for individuals with stable cash flows and a long-term financial planning mindset.

The broader takeaway is clear: the new tax regime is not as deduction-starved as it appears. With intelligent structuring, even higher income levels can achieve zero tax—not by avoiding taxes, but by aligning income with policy-backed savings instruments.