How to Pay Zero Tax on ₹16.75 Lakh Income Under New Tax Regime

Are you earning Rs 16.75 lakh and wondering how you can make your entire income tax-free under India-2025 New Tax Regime? By smartly claiming deductions such as employer contributions to NPS and EPF, interest earnings from PPF and other schemes, benefits on pension income, Agniveer Scheme contributions, and various allowances, you can bring down your taxable income below the tax-paying limits. Let’s look at how you can do this step by step.

Also Read – PF Withdrawal Rules Changed: Now Withdraw 90% of EPF for Buying a Home in India

Understanding the New Tax Regime Income Tax Slabs

The new tax regime for salaried individuals sets income tax slabs differently than before. Here are the current slabs:

Income Tax Slabs (Rs)	Tax Rate
Up to 4,00,000	Nil
4,00,001 – 8,00,000	5%
8,00,001 – 12,00,000	10%
12,00,001 – 16,00,000	15%
16,00,001 – 20,00,000	20%
20,00,001 – 24,00,000	25%
Above 24,00,000	30%

Also, there’s a standard deduction of Rs 75,000, which makes income up to Rs 12,75,000 tax-free. So on a Rs 16,75,000 salary, your taxable income after this deduction would be Rs 16,00,000.

Maximizing Tax Benefits with NPS and EPF Contributions

The New Tax Regime allows you to claim tax benefits on employer contributions to your National Pension System (NPS) and Employees’ Provident Fund (EPF).

For NPS, you can claim up to 14% of your basic pay and dearness allowance (DA) as a deduction. Assuming your basic pay is 50% of your total income (Rs 8,37,500), 14% comes to Rs 1,17,250. Deducting this lowers your taxable income to Rs 14,82,750.

Similarly, EPF contributions let you claim 12% of basic pay and DA, which is Rs 1,00,500 here, bringing your taxable income further down to Rs 13,82,250.

Using Interest Earnings from PPF, Sukanya Samriddhi, and Post Office Schemes

Interest earned from Public Provident Fund (PPF), Sukanya Samriddhi Account (SSA), and other government post office schemes is exempt from tax under the new tax regime. For example, if you invest Rs 1 lakh in PPF and Rs 1.5 lakh in SSA, you earn about Rs 17,500 as interest each year.

If you also have investments in other post office schemes earning Rs 3,500 interest, your total tax exemption on interest income sums up to Rs 21,000. This reduces your taxable income further to Rs 13,61,250.

Tax Exemptions on Pension Income and Agniveer Scheme Contributions

Family pension income up to Rs 25,000 or one third of the pension, whichever is lower, is tax-exempt. Claiming this exemption lowers your taxable income to Rs 13,36,250.

Contributions to the Agniveer Scheme by the central government are fully exempt under Section 80CCH(2). If you contribute Rs 25,000, your taxable income drops to Rs 13,11,250.

Claiming Deductions on Transport and Miscellaneous Allowances

Transport, entertainment, uniform, fuel, stationery, and mobile allowances reimbursed by your employer can also be claimed as deductions. For example, on an Rs 8,37,500 basic salary, these reimbursements can total Rs 1,15,000 such as:

These deductions bring your taxable income down to Rs 11,96,250, which is below Rs 12 lakh. Under the New Tax Regime, income below Rs 12 lakh per financial year is effectively tax-free.

Step-by-Step Calculation to Make Rs 16.75 Lakh Income Tax-Free

Step	Deduction	Amount (Rs)	Taxable Income Remaining (Rs)
1	Starting Salary		16,75,000
2	Standard Deduction	75,000	16,00,000
3	NPS Employer Contribution (14%)	1,17,250	14,82,750
4	EPF Employer Contribution (12%)	1,00,500	13,82,250
5	Tax-Free Interest (PPF, SSA, Post Office)	21,000	13,61,250
6	Family Pension Exemption	25,000	13,36,250
7	Agniveer Scheme Contribution	25,000	13,11,250
8	Transport & Misc Allowances	1,15,000	11,96,250
9	Taxable Income Below Tax-Free Threshold		11,96,250

This calculation shows how, by using all the available deductions and exemptions, your Rs 16.75 lakh income can become effectively tax-free under the New Tax Regime.

Keep these deductions in mind when you file your income tax return, and make sure you meet the eligibility and documentation requirements. For official details, you can visit the Income Tax Department of India.