Income Up to ₹14.66 Lakh, Tax = ₹0! New Tax Rules Every Salaried Employee Is Talking About

The income tax 2026 is constantly changing, making it difficult for salaried employees in India to plan and strategise how to pay as little tax as possible. Living expenses are increasing, and for many, salaries are not increasing as quickly, making the nullification of tax a priority number one when considering how to plan their income tax. For example, while earning 14.66 lacs, one should legally be able to avoid paying income tax. 

This is not a loophole; it is simply a good example of how to use the new tax regime designed to simplify taxes, while also encouraging the populace to save for retirement. Therefore, in this piece, the focus is on how to optimise one’s salary in order to stay zero-tax for the majority of the years in order to achieve the most effective zero-tax salary possible for the duration of FY 2026-27 setbacks. 

Whether saving thousands with tax planning while attaining financial security sounds good to you, learning these strategies will benefit any professional, whether they are in the beginning stages or mid-level of their career. It will cover the new tax regime, critical exemptions, and a calculation to demonstrate how to achieve zero tax. This will provide you with updated strategies for income tax planning.

What Is the New Tax Regime and Why Choose It for Income Tax 2026?

Since the first new tax regime was proposed in 2020, and subsequently refined in the next budgets, it has most recently set the default for salaried taxpayers in income tax 2026. Unlike the previous regime that gave the taxpayer the freedom to make multiple deductions, such as the one for investments or home loans under section 80C, the new regime presents a lower rate with fewer deductions and more simplified slabs. 

 

However, with a higher rebate and less accounting to do, it is more favourable to those who do not want to put in a receipt management effort for tax savings. In the tax budget of 2026, the new tax regime has not made any changes to tax slabs for 2026-2027. Here is a summary of the tax slabs announced: 

- Total Income up to 3,00,000: 0% Tax 

- 3,00,001 - 7,00,000: 5% Tax 

- 7,00,001 - 10,00,000: 10% Tax 

- 10,00,001 - 12,00,000: 15% Tax 

- 12,00,001 - 15,00,000: 20% Tax 

- Income above 15,00,000: 30% Tax

One important detail is the 87A tax rebate, which provides 60,000 of tax relief for individuals with taxable income of 12,00,000 or less. This means an income of 12,00,000 is tax-free. In addition, the standard deduction for salaried employees of 75,000 is added, increasing the threshold to 12,75,000 for no tax.

Additionally, this value can be increased to Rs 14.66 lac, incorporating employer contributions to retirement funds. These are not individual deductions, but rather salary tax exemptions based on your compensation structure, which are perfectly legal under the new tax regime. For salaried individuals who may not be inclined to make numerous investments, this method provides the greatest tax savings through payroll tax adjustments.

Key Factors Leading to Zero Tax Income

To achieve zero tax on Rs 14.66 lac, you must optimise three factors: the standard deduction, employer EPF contributions, and employer NPS contributions, which are new tax regime proof and help to lower your taxable income.

1. Standard Deduction: Flat Rs 75,000 Relief

The standard deduction was introduced as a replacement for obsolete allowances. For FY 2026-2027, the standard deduction will be set at Rs 75,000, which is 25,000 more than in prior years. This is an automatic exclusion from your gross salary. This pushes the zero tax boundary even higher, demonstrating that it is a significant factor driving tax savings for salaried individuals.

2. Employer EPF Contribution: Exempt Under Section 17(2)

EPF is an Employee Provident Fund, where NPS is the National Pension Scheme. EPF is a mandatory retirement scheme for employees who are a part of the organised sector. An employer contributes 12% of an employee's basic salary towards EPF, which is not subject to tax, thereby not being a part of the taxable income. 

This is a tax exemption on salary, which results in a tax deduction on the employee's taxable base, while the retirement fund is growing at a guaranteed interest rate, which is around 8.25% currently.

3. Employer NPS Contribution: Deductible Under Section 80CCD(2)

NPS, which is the National Pension Scheme, is also a retirement scheme in which tax planning can be done, where an employee can opt for NPS and the employer's contribution to NPS is not considered a part of taxable income. At 14% of the basic salary, the employer's contribution is deductible. Most of the employer's contribution to EPF, NPS, and superannuation is not subject to tax. Incomes around 14.66 lac are not affected by the contribution cap.

How to Optimise Your Salary Structure

To achieve zero-tax income, you will need to work with your employer on how to negotiate your salary. Here’s how to structure it:

1. Set Basic Salary at 50% of CTC: Try to get your basic salary set to 50% of your total cost to company (CTC) value. This way, employer contributions are set at their maximum value. Remember, this is set on basic pay only.

2. Incorporate EPF Contributions: Your employer has to deduct 12% of your basic pay to EPF, and the company contributes the same amount. Check if it is appropriately reflected in your payslip.

3. Opt for Employer NPS Contributions: You can request your employer to contribute up to 14% of your basic salary to the NPS. Many companies offer this in their menu of Flexible Benefit Plans. If your company does not offer this, you may be able to negotiate it as part of your salary.

4. Minimise Taxable Allowances: House Rent Allowances (HRA) and Leave Travel Allowances (LTA) are subject to tax and are not exempt under the new regime. Meal vouchers are a non-taxed way to reimburse company meals, though, and you may want to focus on those.

5. Review and File: At the end of the year, you want to check your Form 16 to make sure these exemptions are being shown appropriately. To claim the rebate, you want to file under the new tax regime.

This configuration turns what would have been tax liability into retirement savings, which for salaried professionals, is one of the best smart tax-saving strategies.

Tax-Free Calculation of Rs 14.66 lac

Let’s take an example. For FY 2026-27, assume CTC is Rs 14.65 lac (for calculation purposes, let’s round it up to Rs 14.66 lac), and there is no other income.

- Basic Salary: CTC's 50% = Rs 7,32,500

- Employer EPF Contribution: 12% of basic = Rs 87,900 (Exemption under Section 17(2)).

- Employer NPS Contribution: 14% of basic = Rs 1,02,550 (deductible per Section 80CCD(2)).

- Gross Salary (CTC): Rs 14,65,000.

- Deductions:

  - Standard Deduction: 75,000

  - Employer EPF: 87,900

  - Employer NPS: 1,02,550

- Total Reductions: Rs 2,65,450

- Taxable Income: 14,65,000 -  2,65,450 = 11,99,550

Apply new tax regime slabs to 11,99,550:

- Up to 3 lac: 0

- 3-7 lac (4 lac): 5% = 20,000

- 7-10 lac (3 lac): 10% = 30,000

- 10-11.9955 lac (1.9955 lac): 15% = 29,932.50

- Total Tax Before Rebate: 79,932.50 (approx; actual calculation ensures it's under rebate limit)

Taxable income being under 12 lac means the Section 87A rebate nullifies the tax completely. No tax income. This assumes the basic is 50% of CTC; small changes could bring CTC to exactly 14.66 lac.

 

 

Benefits Beyond Just Tax Savings

Choosing this option for income tax in 2026 is not only tax-free income; it is also complete financial planning. EPF is a safe compound retirement fund, while NPS has returns that are higher, with potential gains (historically 10-12% annualised) due to equity exposure. These contributions can grow to crores, especially over 20-30 years, and will ensure protection for your retirement.

In addition to this, it also helps to encourage disciplined saving without taking any cash out. Tax saving is a win for salaried employees who overlook retirement planning due to daily expenses, as out-of-pocket expenses are not involved.

Important Considerations and Assumptions

• Employer Participation: NPS is not offered by all companies, so understand your HR policies well. EPF is mandatory for companies with 20 or more employees.
• Caps and Limits: Total exempt employer contributions cannot exceed Rs 7.5 lac. Taxable interest (employee contribution over Rs 2.5 lac) on EPF above Rs 2.5 lac does not apply here.
• No Other Income: Salary income only is assumed. If interest or rental income is received, you may exceed the threshold.
• Switching Regimes: You can switch from the old to the new regimes every year, but for zero tax income at this level, the new regime is optimal.
• Budget Changes: Adjustments are usually announced before the new fiscal year. As of February 2026, no changes are scheduled, but stay tuned for a potential mid-year leak. If your basic pay is less than 50%, you will have to negotiate on the zero tax limit.
  
  

Tax Regime Comparison: Which is Best for You?

With the old regime, you can claim deductions on tax-saving investments (Rs 1.5 lac), home loan interest (Rs 2 lac), and get HRA exemptions. This potentially makes you zero tax in even the highest brackets (20 lac+). However, you will have to do some active investments and provide proof of submission.

The new regime is easier and may be suited for those looking for a simpler tax regime and isn’t focused on tax saving via personal spending. If your income is higher than or equal to 15 lac, focus on both the old and new regimes using an online tax calculator for FY 2026-27.

Top Tips for Effective Income Tax Planning for 2026

• Start Tax Planning: Restructure your salary as soon as you get to April 2026.
• Use Simulation Tools: Government and apps like ClearTax have some useful simulation tools.
• Balance NPS: For off NPS investment, you may consider the equity, debt, and government split funds.
• Monitor: The finance ministry frequently changes tax exemptions to manage salaries.
• Get Tax Expert Advice: A CA can help you manage this.

These tips can help you achieve your dreams of becoming a zero-tax income earner. 

 

 

Conclusion: Empower Your Finances with Smart Tax Strategies

To conclude, with the income tax in 2026, salaried employees have a unique chance to reach a zero tax income level for the period of 2026-27, under the new tax regime, up to Rs 14.66 lac. By maximising your employer EPF and NPS contributions with the standard deduction, you can not only relieve yourself of tax liability but also build a solid retirement fund. This example of tax saving for salary earners equals tax retirement fund wealth.

It is your income tax planning, and it is also personal. Plan, do, keep the time factor on your side, and with the guidance provided, you have the means to make FY 2026-27 a zero-currency year for you. Plan and prosper.

DISCLAIMER: This blog is NOT any buy or sell recommendation. No investment or trading advice is given. The content is purely for educational and information purposes only. Always consult your eligible financial advisor for investment-related decisions.