Income Tax: With the start of 2026, taxpayers are keeping a close eye on the income tax return forms. The Income Tax Department will release new ITR forms in the coming months. Meanwhile, several important points have emerged regarding the new tax regime for salaried individuals, which can significantly reduce the tax burden.

Under the new tax regime, the government has provided relief to the middle class by making annual income up to ₹12 lakh completely tax-free. In addition, facilities like standard deduction have also been included, which further reduces taxable income.

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The Role of Standard Deduction in the New Tax Regime

Employees who opt for the new tax regime receive a standard deduction of ₹75,000. This exemption is provided under Section 115BAC(1A)(iii) of the Income Tax Act, 1961. This benefit is directly deducted from the salary, thereby reducing taxable income.

If a person’s salary is up to ₹12 lakh, they do not need to pay tax after the standard deduction. However, if the income exceeds ₹12.75 lakh, then tax liability arises under normal circumstances.

How EPF and NPS Increase the Tax-Free Limit

Even in the new tax regime, there are some provisions through which the tax-free income limit can be increased. If your company contributes to both the Employees’ Provident Fund (EPF) and the National Pension System (NPS), your tax-free salary can reach up to ₹14.66 lakh.

Even if the company only contributes to EPF and does not provide NPS facilities, a salary of approximately ₹13.56 lakh can still be made tax-free. This benefit is entirely based on the employer’s contribution.

Tax Exemption Rules for EPF in the New Tax Regime

Under the new tax regime, there is no tax exemption under Section 80C for contributions made by the employee to EPF. This system is different from the old tax regime, where employees received tax benefits on their EPF contributions.

However, the employer’s contribution remains tax-free under both tax regimes. Companies can contribute up to 12 percent of the basic salary and dearness allowance to EPF, which is considered tax-free within the annual limit of Rs 7.5 lakh.

Benefits of Employer Contribution to NPS

In the case of NPS, the new tax regime does not provide tax exemption on the employee’s own contributions. However, the employer’s contribution remains completely tax-free. Companies can contribute up to 14 percent of the basic salary and DA to NPS, and this is not taxed.

This rule applies equally to both the old and new tax regimes, making NPS an effective tax-saving and retirement plan.

How to make a salary of Rs 14.66 lakh tax-free

Let’s say an employee’s total annual salary is Rs 14.66 lakh, and their basic salary is Rs 7.33 lakh. The company contributes 12 percent of the basic salary to EPF, which is approximately Rs 87,960. This amount remains tax-free.

In addition, the company contributes 14 percent of the basic salary to NPS, which is approximately Rs 1,02,620, and this is completely tax-free. Adding the standard deduction of Rs 75,000 available under the new tax regime further reduces the taxable income significantly.

Combining all these exemptions, a total of more than Rs 2.65 lakh is excluded from taxable income, resulting in no tax liability even on a salary of Rs 14.66 lakh.

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Strong Retirement Fund with Tax Savings

EPF and NPS are not just tools for saving on taxes, but they also form a strong foundation for future financial security. If a person starts investing ₹10,000 every month in the NPS from the age of 25 and increases the investment by 5 percent every year, they can accumulate a fund worth crores of rupees by the age of 60.

Similarly, regular investments in EPF and the power of compound interest can help build a substantial retirement fund over the long term, providing financial security in old age.