NPS Tax Benefits: Under Budget 2025, the government has made income up to Rs 12 lakh tax-free. Salaried employees can also avoid tax on salary up to Rs 13.7 lakh by taking standard deduction and investing in NPS.
NPS Tax Benefits: Giving great news to Indian taxpayers, Union Finance Minister Nirmala Sitharaman has announced in Budget 2025 that there will be no income tax on salary up to Rs 12 lakh. People seem very happy with this decision. What if we tell you that you can save tax up to a salary of Rs 13.7 lakh? Yes, salaried persons can save tax even on a salary of Rs 13.7 lakh through standard deduction and National Pension System (NPS) investment. Let’s understand this calculation.
How to save tax?
The government has made it tax free under 87(A) for employees with a salary of Rs 12 lakh in the new tax slab. That is, they will not have to pay any tax up to Rs 12 lakh. In such a situation, if your salary is Rs 13.7 lakh, then you can make your salary tax free through standard deduction of Rs 75,000 and contribution to NPS of 14%.
Let us tell you that under 80CCD(2), 14% of your basic salary is contributed to NPS. In such a situation, if your total salary is Rs 13.7 lakh and his basic salary is Rs 6.85 lakh, then 14% NPS contribution will be equal to Rs 95,900. In such a situation, after standard deduction and NPS, your taxable income will be Rs 11.99 lakh. That is, you will not have to pay any tax. Apart from this, we are telling here how much tax you may have to pay up to a salary of 16 lakh. This also includes NPS and standard deduction.
| Basic Income (Rs Lakh) | Basic Salary (Rs Lakh) | NPS Contribution (14% of basic) (Rs) | Taxable Income# (Rs Lakh) | Total Tax** (Rs Lakh) |
| 13.7 | 6.85 | 95,900 | 11.99 | NIL |
| 16 | 8 | 1.12 lakh | 14.13 | 91,950 |
| 24 | 12 | 1.68 lakh | 21.57 | 2.39 lakh |
| 32 | 16 | 2.24 lakh | 29.01 | 4.50 lakh |
| 48 | 24 | 3.36 lakh | 43.89 | 8.97 lakh |
Why NPS is better
Although the NPS tax-saving facility has been available for almost 10 years, only 22 lakh people are registered in it. The biggest reason for this is that the lock-in period of NPS is very long. Apart from this, you cannot withdraw this amount before retirement.
Not only this, on maturity you get only 60% of the amount and 40% of the amount is converted into pension. However, NPS has its own benefits. In this, you have to pay less fund management fees along with fund switching facility. Apart from this, being a long-term investment, it gives better returns.
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