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While the government is working on a new income tax law, they’ve also made some changes in Budget 2025, making income up to Rs 12 lakh tax-free under the new tax regime. Interestingly, there are various calculations floating around. For salaried individuals, there’s good news: even if your salary package exceeds Rs 14 lakh, you won’t owe any taxes.
When you’re employed, companies present a CTC (Cost to Company) that includes not just your salary but also contributions to EPFO, insurance, gratuity, and more. This gives you a clear picture of your total salary package.
Here’s how the income tax works:
To maximize your tax savings, it’s important to know that the company’s EPFO contribution in your CTC is 12% of your basic salary, which typically makes up about 50% of your total salary.
Let’s say your CTC is slightly over Rs 14 lakh, around Rs 14.65 lakh. In this case, the company’s EPFO contribution would be about Rs 87,900, which is tax-free. If your employer also contributes to NPS, that’s an additional 14% of your basic salary, making that income of Rs 1.02 lakh tax-free as well.
On top of that, salaried individuals can benefit from a standard deduction of Rs 75,000. After accounting for these deductions, your taxable income would be Rs 11.99 lakh. Thanks to the tax rebate under section 87A of the Income Tax Act, your tax liability would be zero.