Finance Minister Smt. Nirmala Sitharaman has introduced updates aimed at providing relief to the middle class. Under the New Tax Regime (NTR), the rebate limit has been increased from Rs 7 lakh to Rs 12 lakh.
Slabs have been revised to benefit higher-income earners, helping them keep more of their income. Here are the new tax rates for income above Rs 12 lakh.
| Income Range (₹) | New Rate |
|---|---|
| 0 – 4 lakh | Nil |
| 4 – 8 lakh | 5% |
| 8 – 12 lakh | 10% |
| 12 – 16 lakh | 15% |
| 16 – 20 lakh | 20% |
| 20 – 24 lakh | 25% |
| Above 24 lakh | 30% |
1. Standard Deduction
Individuals earning up to Rs 12.75 lakh annually will not have to pay any income tax after applying the Standard Deduction of Rs 75,000. This change puts more disposable income in the hands of taxpayers across different salary ranges.
2. Tax Savings Through National Pension System
Salaried individuals can enjoy tax-free income up to Rs 13.7 lakh annually, higher than the Rs 12 lakh limit for others. This is possible through a Rs 75,000 standard deduction and NPS investments.
Under Section 80CCD(2) from Budget 2024, employees can deduct up to 14% of their basic salary for NPS contributions, up from 10% earlier.
For a salary of Rs 13.7 lakh with 50% as basic pay, a 14% NPS contribution equals Rs 95,900, reducing tax liability to zero.NPS offers low fund management fees (0.09%), flexible fund switching, and better returns than many mutual funds.
3. EPF Contributions and Tax Benefits
The Employees’ Provident Fund (EPF) remains a key option for retirement savings, especially if funds are not withdrawn early when changing jobs.
Contributions are mandatory for those with a basic salary of Rs 15,000 or less, while those earning more can opt out. EPF offers an attractive interest rate of 8.25%, making it a solid choice among low-risk investment options.
Employees can also make voluntary contributions through the Voluntary Provident Fund (VPF), which offers the same interest rate. However, interest earned on contributions exceeding Rs 2.5 lakh annually is taxable.
Withdrawals from EPF remain tax-free under certain conditions.
4. EPF and NPS Under the New Tax Regime
In the New Regime, EPF offers partial tax exemptions. Employer contributions, interest earned, and withdrawals (within set limits) are tax-free. However, employee contributions no longer qualify for tax deductions.
Employer contributions of up to 12% of your salary are tax-exempt, subject to an annual cap of Rs 7.5 lakh for combined contributions to PF and NPS.
If your starting salary was above Rs 15,000, you had the option to skip EPF enrollment. Once enrolled, you cannot opt out during your employment.
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