Unlocking Zero Tax: Your Guide to Maximizing Savings Under India's New Regime

For most of us, income tax is simply a given – an unavoidable chunk taken out of our hard-earned salary. But what if I told you that, with a little foresight and smart strategy, it's entirely possible for salaried employees to legally pay zero tax on a substantial income, even up to Rs 14.66 lakh, specifically for the Financial Year 2026-27? Sounds a bit like magic, doesn't it? Well, it's actually clever financial planning, all thanks to the updated new tax regime.

The government's new tax regime, which became the default option from FY2023-24, has been steadily sweetened to make it more attractive. It simplifies things, moving away from a plethora of deductions towards lower tax rates. But crucially, it also offers a couple of key benefits that, when combined, can create a powerful tax-saving opportunity for individuals with higher incomes.

Let's break down how this can work. The cornerstone of this zero-tax strategy lies in three main components available within the new tax regime. Understanding these is vital for anyone looking to optimize their tax liability.

First up, we have the Standard Deduction. This is a flat deduction of Rs 50,000 available to all salaried employees. It's a straightforward benefit, automatically reducing your taxable income right off the bat. No forms, no investments needed; it just helps bring down your gross income before tax calculations begin. It’s a welcome relief, especially for those who felt the new regime was too barebones initially.

Next, and perhaps the most significant factor for many, is the tax rebate under Section 87A. This is truly a game-changer. Under the new regime, if your 'taxable income' – that's your income after all permissible deductions – is Rs 7 lakh or less, you qualify for a full tax rebate. In simple terms, this means you pay zero income tax. So, the goal is to bring your income down to that Rs 7 lakh threshold. When you combine this with the Rs 50,000 standard deduction, it effectively means an individual with a gross salary of Rs 7.5 lakh can pay zero tax. That’s pretty good, right?

But what if your gross salary is higher than Rs 7.5 lakh, say, closer to Rs 14.66 lakh? This is where the third, often overlooked, yet incredibly powerful component comes into play: the employer's contribution to the National Pension System (NPS) under Section 80CCD(2). While most other traditional deductions like HRA, LTA, and Section 80C investments are not available under the new regime, the employer's NPS contribution remains a notable exception. An employer can contribute up to 10% of your Basic + Dearness Allowance (DA) to your NPS account, and this amount is deductible from your gross income. This is a fantastic way to save for retirement while simultaneously lowering your current year's taxable income.

Now, let’s piece it all together for that magical Rs 14.66 lakh figure. Imagine an individual with a gross salary of approximately Rs 14,66,667. Here's a potential pathway to zero tax:

First, subtract the Standard Deduction of Rs 50,000. Your income effectively comes down to Rs 14,16,667.

Now, to bring this down to the Rs 7 lakh taxable income mark (for the Section 87A rebate), you need to reduce it by another Rs 7,16,667 (14,16,667 - 7,00,000). This substantial reduction can be achieved through your employer's contribution to NPS under Section 80CCD(2). If your salary structure allows for a significant portion, specifically Rs 7,16,667, to be contributed by your employer to your NPS account (which is capped at 10% of Basic + DA, requiring a specific salary structure where Basic + DA is substantial), then your remaining taxable income would be precisely Rs 7,00,000.

At Rs 7,00,000, thanks to the Section 87A rebate, your total income tax liability becomes a grand total of… zero! It's a highly specific scenario, yes, one that relies on maximizing that employer NPS contribution alongside the standard deduction. But it perfectly illustrates how these mechanisms, when used strategically, open up significant tax-saving avenues.

For salaried employees in FY2026-27, this isn't just theoretical; it's a call to action. Take the time to understand your salary structure, discuss NPS contributions with your HR department, and consider consulting a financial advisor. Proactive planning is key to unlocking these benefits. By strategically leveraging the standard deduction, the Section 87A rebate, and the employer's NPS contribution, that dream of zero tax on a substantial income can indeed become a tangible reality.