Under the new income tax regime (now the default system), the effective tax-free income limit is no longer capped at ₹7 lakh. With a combination of rebates, deductions, and tax-exempt components, it can extend to nearly ₹15 lakh for salaried individuals.
How does this work?
1. Zero tax up to ₹12 lakh (taxable income)
If your taxable income does not exceed ₹12 lakh, you don't have to pay any income tax due to the rebate available under the new regime.
2. Standard deduction for salaried individuals
A flat deduction of ₹75,000 is available. This means if your gross salary is ₹12.75 lakh, your taxable income reduces to ₹12 lakh, bringing your tax liability down to zero.
3. Higher tax-free gift allowance
From FY 2026-27, employers can provide up to ₹15,000 per year in tax-free gift or festival vouchers (earlier ₹5,000). This amount is not included in taxable income.
So effectively ₹12.75 lakh (salary) + ₹15,000 (gifts) will come to ₹12.90 lakh with zero tax
Can ₹14.80 lakh also be tax-free?
Yes, if your salary is structured efficiently.
Abhishek Soni, CEO and Co-founder of Tax2win points out that even with a Cost to Company (CTC) of ₹14.80 lakh, salaried individuals can reduce their taxable income below ₹12 lakh and end up paying zero tax under the new regime.
Here's an example breakdown:
Annual CTC: ₹14,80,000
Basic Salary (50%): ₹7,32,500
Deductions and exemptions
Employer NPS contribution (14% of basic): ₹1,02,550
Employer EPF contribution (12% of basic): ₹87,900
Standard deduction: ₹75,000
Gift vouchers: ₹15,000
Taxable income calculation:
The taxable income comes down to approximately ₹11.85 lakh, which is below the ₹12 lakh threshold.
| Component | Amount (₹) | Notes |
|---|---|---|
| Annual CTC | 14,80,000 | Total cost to company |
| Basic Salary (50%) | 7,32,500 | 50% of CTC |
| Employer NPS Contribution (14% Basic) | 1,02,550 | Deduction |
| Employer EPF Contribution (12% Basic) | 87,900 | Deduction |
| Standard Deduction | 75,000 | Deduction |
| Gift Vouchers | 15,000 | Exemption |
| Total Deductions & Exemptions | 2,80,450 | Sum of above |
| Taxable Income | ~11,85,000 | CTC - Deductions |
income-tax-calculator
Important condition to claim this benefit
This tax advantage is not automatic. It applies only when your salary package is structured to include employer contributions to retirement schemes.
To reach the ₹14.80 lakh zero-tax range, your CTC must include both NPS and EPF contributions by the employer. Without these components, the taxable income may not fall below the ₹12 lakh limit.
Also, this benefit is specifically available to salaried individuals whose compensation includes such structured contributions.
Key rule changes effective April 1, 2026
Gift allowance increased: Tax-free gift vouchers raised to ₹15,000 annually (available under both old and new regimes).
Even with a salary nearing ₹15 lakh, careful salary structuring, especially using NPS, EPF, standard deduction, and tax-free perks, can legally reduce your taxable income under the new regime.
What are the income tax slabs from April 1?
There will be no revision in income tax slabs from April 1. This is because Budget 2026 did not introduce any changes to the slab rates under either the old or the new tax regime.
New tax regime
| Income Range (₹) | Tax Rate |
|---|---|
| Up to 4 lakh | No tax |
| 4 lakh to 8 lakh | 5% |
| 8 lakh to 12 lakh | 10% |
| 12 lakh to 16 lakh | 15% |
| 16 lakh to 20 lakh | 20% |
| 20 lakh to 24 lakh | 25% |
| Above 24 lakh | 30% |
The Government has notified the Income Tax Rules, 2026, with changes effective April 1, 2026, impacting multiple salary perquisites and allowances.
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