How to Legally Pay Zero Tax on Rs 13.7 Lakh Salary: Tax Saving Tips for Salaried Employees
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In the latest Budget 2025, the Finance Ministry has proposed measures that can help you save a significant amount of tax, even if your salary is as high as Rs 13.7 lakh annually. The secret lies in two powerful tools: the Standard Deduction of Rs 75,000 and National Pension System (NPS) contributions.
1. Standard Deduction: Simple and Effective 💼💰
A salaried employee can claim a Rs 75,000 standard deduction from their taxable income. This means, if your salary is Rs 13.7 lakh, you can reduce your taxable income by Rs 75,000, which immediately brings down the tax liability.
2. NPS Contribution: The Game-Changer 🏦
NPS is where the magic happens. Under Section 80CCD(2), up to 14% of your basic salary can be invested in the National Pension System (NPS), and it will be tax-deductible. This is an improvement over the old regime, where the tax benefit was capped at 10%.
Let’s break it down:
Example:
- Annual Salary: Rs 13.7 Lakh
- Basic Salary (assuming 50%): Rs 6.85 Lakh
- NPS Contribution (14% of Rs 6.85 Lakh): Rs 95,900
So, Rs 95,900 can be deducted from your taxable income, making it an effective tax-saving strategy. 😎
How to Calculate Your Taxable Income? ✍️
Now, let’s see how these deductions impact your tax calculation:
- Annual Salary: Rs 13.7 Lakh
- Standard Deduction: Rs 75,000
- NPS Contribution: Rs 95,900
Taxable Income = 13,70,000 - 75,000 - 95,900 = Rs 11,99,100
With the new tax regime, you won’t have to pay any income tax on Rs 13.7 lakh salary, thanks to these deductions. 💸
What’s the Catch? 🤔
The major condition is that your employer must offer NPS as part of your salary package. So, it's important to check if your employer provides this benefit. If not, you can still consider making voluntary contributions to NPS, but the employer contribution offers better tax-saving opportunities.
NPS: More Than Just Tax Saving 💼💡
Apart from tax benefits, NPS offers a wide range of advantages:
- Choice of asset allocation: Equity, debt, or government securities – you choose!
- Flexibility: Switch funds or pension fund managers without any tax penalties.
- Low Fund Management Fees: At just 0.09% per year, NPS has one of the lowest charges in the industry, making it a cost-effective way to grow your wealth.
Bonus: Tax-Free Income Threshold 📈
In the new tax regime, the tax-free income threshold has been raised to Rs 12 lakh (Rs 12.75 lakh with standard deduction). This will provide huge relief to millions of middle-class taxpayers and help boost disposable income, especially for families managing expenses like EMIs, education, and healthcare.
Why You Should Act Now 🚀
The new tax measures are a golden opportunity for salaried individuals to reduce their tax burden and increase disposable income. If you haven’t already enrolled in NPS, now is the perfect time to do so and enjoy both the tax-saving and retirement planning benefits it offers.
Conclusion ✨
If you earn Rs 13.7 lakh annually, you can legally save up to Rs 96,000 in taxes, all thanks to the Standard Deduction and NPS contributions. By optimizing your salary structure, you can reduce your taxable income significantly, ensuring more take-home pay in your pocket. Don't miss out on this opportunity to save big!
Key Takeaways:
- Standard Deduction of Rs 75,000
- 14% NPS contribution for tax saving
- No tax on up to Rs 12.75 Lakh income in the new regime
- Check if your employer offers NPS benefits! 🧐
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