Latest income tax slabs 2025-26 after Budget 2025: Zero income tax on Rs 13.7 lakh salary? Don’t rub your eyes! Finance Minister Nirmala Sitharaman in her Budget 2025 speech introduced that there will likely be NIL or zero income tax for people incomes as much as Rs 12 lakh. But did you know that for salaried people, the tax-free annual income can attain Rs 13.7 lakh, in comparison with Rs 12 lakh for others!
“I am now happy to announce that there will be no income tax payable upto income of Rs 12 lakh (i.e. average income of Rs 1 lakh per month other than special rate income such as capital gains) under the new regime. This limit will be Rs 12.75 lakh for salaried tax payers, due to standard deduction of Rs 75,000,” FM Sitharaman introduced in her Union Budget speech.
This benefit of no tax until Rs 13.7 lakh income stems from the Rs 75,000 normal deduction and National Pension System (NPS) investments. Section 80CCD(2) permits tax deduction of as much as 14% of primary salary invested in NPS, while the previous tax regime provides 10%.
According to an ET evaluation, a salaried particular person with Rs 13.7 lakh yearly income can obtain tax financial savings of roughly Rs 96,000 by NPS contributions. It’s necessary to notice that this profit requires employer participation in NPS as a part of price to the corporate, as staff can’t choose independently.
For an annual income of Rs 13.7 lakh, with primary salary at 50% (Rs 6.85 lakh), the NPS contribution at 14% would quantity to Rs 95,900. Combined with the Rs 75,000 normal deduction, this eliminates tax legal responsibility on all the Rs 13.7 lakh.
It’s attention-grabbing to notice that regardless of this chance current for practically a decade, solely 2.2 million people have enrolled. “Only a few corporates are interested in rolling out the NPS benefit, and even fewer employees are willing to enrol in it,” stated Sudhir Kaushik, chief govt of tax submitting portal Taxspanner.com.
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The prolonged NPS lock-in interval and withdrawal limitations at maturity discourage many traders. Pre-retirement withdrawals are restricted to distinctive circumstances. Upon maturity, solely 60% can be withdrawn, while 40% should be invested in an annuity for lifetime pension.
Financial specialists contemplate these restrictions helpful. “The lack of liquidity in NPS is not necessarily bad because the money is at the right place. Investment returns can be enormous if held for the long term,” stated Sriram Iyer, chief govt of HDFC Pension.
NPS offers further advantages, together with asset combine choice, fund switching choices, and pension fund supervisor adjustments with out tax implications. It maintains the trade’s lowest fund administration fees at 0.09% yearly, in comparison with 1-1.5% for essentially the most economical mutual funds. This has enabled NPS funds to outperform mutual funds in comparable classes.
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