Tax Planning 2026: India is getting ready for the Union Budget 2026, which will be presented on Sunday, February 1. Even before the Budget day arrives, the work has already started. Finance Minister Nirmala Sitharaman has begun meetings with states and Union Territories to understand their needs and plans.
This will be her ninth Budget in a row and many salaried people are watching closely to see if there are changes in personal taxes. The focus this year again stays on the new tax regime which has already changed how people think about saving and tax planning.
Best Car Loans in India 2026: Compare Interest Rates, EMIs and Top Lenders
How the new tax regime changes savings?
The new tax regime brought lower tax rates and wider slabs but removed most old deductions. One big benefit is that people earning up to Rs 12 lakh in a year pay zero income tax under this system. This single change has pushed many salaried workers to rethink how they manage their salary and savings. Instead of putting money into last-minute investments, the system now encourages planned salary structures and long-term savings.
Experts say the real benefit comes when employees use employer-supported retirement tools like EPF and NPS. These options not only help save tax but also build a strong retirement fund over time. Younger employees especially gain more because their money stays invested for many years and grows steadily.
| Particulars | Amount (Rs ) |
| Cost to Company (CTC) | 14,65,000 |
| Basic Salary (50% of CTC) | 7,32,500 |
| Employer EPF Contribution (12% of basic) | 87,900 |
| Employer NPS Contribution (14% of basic) | 1,02,550 |
| Gross Salary | 14,65,000 |
| Less: Standard Deduction | (75,000) |
| Less: Employer EPF (Exempt) | (87,900) |
| Less: Employer NPS – Section 80CCD(2) | (1,02,550) |
| Taxable Income | 11,99,550 |
| Income Tax Payable | Nil |
Using EPF and NPS to reach zero tax
Many people do not know that under the new regime, it is possible to pay zero tax on income higher than Rs 12 lakh. Salaried employees can push this limit up to around Rs 14.65 lakh if they plan their salary properly. This works when employers contribute more to EPF and NPS as part of the salary structure.
Lower SBI Loan Rates Explained: How Switching or Top-Ups Can Save Interest?
“Salaried individuals opting for the new tax regime can structure their compensation to keep income of up to Rs 14.66 lakh effectively tax-free, provided employer-supported retirement benefits are optimally used,” said CA Akshay Jain, Direct Tax Partner at NPV & Associates LLP.
The need is to keep basic salary close to about 50% of total cost-to-company. When the employer puts 12% of basic pay into EPF and up to 14% into NPS, the tax impact reduces a lot. Along with the standard deduction of Rs 75,000, this structure can bring taxable income below Rs 12 lakh even if the total salary is higher.
Jain also explained why employer NPS matters the most. “Employer contribution to EPF is exempt under Section 17(2), while employer contribution to NPS qualifies under Section 80CCD(2) — a deduction specifically allowed even in the new regime. This makes employer-facilitated NPS the most powerful lever for tax planning.”
There are limits to remember. Employer contributions to EPF, NPS, and superannuation are tax-free only up to Rs 7.5 lakh in a year. Anything above that becomes taxable. NPS also money paid directly by the employee does not give tax benefit under the new regime unless it comes through the employer.
On a salary of Rs 14.65 lakh, with basic pay of about Rs 7.32 lakh, employer EPF of Rs 87,900, employer NPS of Rs 1.02 lakh and the standard deduction, taxable income drops to around Rs 11.99 lakh.
