I recently got a job and my final CTC is 14L.
After the rebate was increased in Budget 2025, salaried people will not have to pay any tax till ₹12.75L. Are there any ways I can bring my income down to this level, so I don’t have to pay taxes?
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Yes, as per the Budget 2025 update, salaried individuals under the new tax regime do not have to pay income tax if their taxable income is up to ₹12.75 lakh.
Now, since your CTC is ₹14 lakh, your taxable income is likely to be higher, but there are ways to bring it down.
First, let’s understand what CTC includes—it’s the total amount your employer spends on you, which covers salary, benefits, bonuses, and contributions to retirement schemes like EPF (Employee Provident Fund) and NPS (National Pension System).
Now, while the new tax regime does not allow most deductions u/s 80C (like LIC, PPF, ELSS, etc.), 80D (health insurance), or HRA, there are two ways you can still reduce your taxable salary.
Under the new regime, you can claim deductions against:
1) Employer’s contribution to EPF: Up to 12% of your basic salary (and DA) is exempt from taxes.
2) Employer’s contribution to NPS: Up to 14% of your basic salary (and DA) is deductible from your taxable income.
So, what should you do?
See, almost every company contributes to EPF on behalf of employees. To check how much is being contributed, take a look at the detailed breakup of your CTC. If needed, you can increase your contribution to 12% of your basic salary, so that your employer also contributes the same amount.
Unlike EPF, NPS is usually voluntary. You’ll need to check whether your employer offers an NPS contribution. If they do, you can restructure your CTC to contribute 14% of your basic pay toward NPS, which your employer will also match.
Now, considering your CTC is ₹14L, let’s assume the basic pay is 50%. In that case, your employer’s maximum contribution to EPF and NPS will be as follows:
Once your taxable salary falls below ₹12.75 lakh*, the net taxable income reduces to under ₹12 lakh after applying the ₹75,000 standard deduction. As a result, no tax is payable under the new regime due to the rebate available under Section 87A.
*assuming you do not have any other income source apart from salary
Lastly, a quick heads-up before you ask your employer to max out EPF and NPS contributions:
a) This will reduce your in-hand salary, as you’ll also need to match these contributions.
b) The amount invested in EPF and NPS is locked-in for a long time, and you won’t be able to access it before maturity.
So, make sure you consider these factors and make an informed decision based on your goals.
Dear Anjali, If your income under 12.75 lakh per annum then no need to pay any tax, you can convert it from 14L to 12.5L using your deductions.
Under which section EPF deduction is avalaible under new tax regime.
Hello @vignesh_FACT ,
Under the new tax regime, the employer’s contribution to EPF is exempted from tax. The relevant provision for this law is mentioned under section 17(2)(vii).
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Hi Sakshi i agree that EPF is exempted from tax. But my question whether we can claim deduction similair to U/s 80c. Whether any provision that EPF of employer contribution csn we get deduction under new tax regime in Income tax return as per your explansion in above
“Employer EPF contribution Rs.84000/-”
We know that employer contribution towards NPS we get deduction u/s 80CCD
The deduction related to EPF u/s 80C is for employee’s own contribution to EPF.
For the employer’s contribution, you don’t need to claim any separate deduction. Just report your salary after excluding the employer’s EPF contribution.
In the above case the user will report their gross salary as ₹13.16 lakh (₹14L - ₹0.84L)** in their ITR.
Hello Sakshi,
As you said that in the said case the user will report their salary after deducting the employer’s part of EPF however this will create a variance between the Salary Income reported in form 16 because the employer shows total salary which includes their part of EPF as well.
Also, there is no separate mention of employer EPF in Form 16.
Please advise.
Hi @Karandeep_Singh,
The gross salary reported in your form 16 does not include employer’s contribution. In the above case we have reduced the employer’s contribution from the CTC and not his gross salary from form 16.
Thus, there will be no variance between form 16 and our reporting in the ITR.
Hi Sakshi,
As the overall limit on employer’s contribution to to EPF, NPS and/or superannuation is Rs 7.5 lakh, so for example if someone’s Base salary is 2,00,000 the employer share of PF will be 24,000 per month i.e. 2,88,000 annually (well within the annual limit of 7.5 lakh assuming employee is not part of NPS and superannuation to superannuation will be let’s say 100,000 annually). So does that mean this entire 2,88,000 will be tax free? Also will there be tax liability on the interest portion of 38,000 as it exceeded 2.5 lakh limit?
@Sakshi_Jain Gratuity is normally as a part of Employer’s contribution in our CTC. Will gratuity also be deducted from taxable income apart from 12% EPF and 14% NPS??
Hello @imishra ,
Could you first confirm if the amount of contribution to gratuity is included in your gross salary mentioned in your form 16?
Generally the taxability of gratuity is calculated when you withdraw the gratuity.