Recently, the Finance Minister proposed new tax measures during Budget 2025. It allows the people to pay zero tax on Rs 13.7 lakh salary. To save the tax, it introduce two powerful tools, Rs 75,000 standard deduction and contributions to the National Pension System (NPS).
Zero tax on Rs 13.7 lakh salary: Tax Benefits on 13.7 Lakh Salary
If you are salaried individual, then you can reduce the tax liability, by leverage deductions and NPS benefits. Here how
| Components | Tax-Saving Amount |
| Standard Deduction | ₹75,000 |
| NPS Contribution (14% of Basic) | ₹95,900 |
| Total Deduction | ₹1,70,900 |
The contribution of employees under Section 80CCD(2) allow deduction up to 14% of basic salary, if government employees and allow deduction up to 10%, if private-sector employees. The remaining amount is tax-free and combined with the standard deduction, as per new budget measures.
Challenges with NPS: Lock-In Period & Limited Liquidity
The main deterrents for people are the lock-in period and restrictions on withdrawals. The NPS funds are not accessed until retirement, except in rare cases. Only 60% of the corpus are withdrawn at maturity and the other 40% are used to buy an annuity for the lifelong pension.
Additional NPS Benefits: Zero tax on Rs 13.7 lakh salary
NPS provides several benefits in terms of low fees, flexibility and tax benefits
- Choice of Asset
You get the choice to choose asset allocation, equity, debt, or government securities. You get flexibility to switch funds, and change your fund choices.
- Low fund management fees
NPS boasts low charges in the industry, only 0.09% per year, as compared to 1-1.5% charged by mutual funds. It keeps your investment costs lower and grows your money effectively.
As salaried individual, you will save up to Rs 96,000 in tax annually. It is because of the standard deduction and NPS benefits. You must offer NPS as part of your salary package to get benefits. This opportunity of zero tax on Rs 13.7 lakh salary is ideal to review your salary structure and enroll in NPS, if you don’t have already.
This announcement by Finance Minister raise tax free income, up to 12 lakh under new tax regime. It reaches around Rs 12.75 lakh with a standard deduction for salaried individuals and allows them to live tax-free life.
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