How to Save Tax for Salary above Rs. 12 Lakh: New Regime Options

Last updated: Oct 2026

For a salary above Rs. 12 lakh, tax starts once taxable income crosses Rs. 12 lakh and the rebate of up to Rs. 60,000 ends. Employer contributions to the National Pension System (NPS) are the largest lever left in the new regime.

• Standard deduction: Rs. 75,000 for salaried individuals
• Employer NPS: up to 14% of basic pay and dearness allowance
• Rs. 13 lakh salary: Rs. 26,000 tax, falling to Rs. 0 with Rs. 91,000 of employer NPS
• Rs. 15 lakh salary: Rs. 97,500 tax, or Rs. 81,120 with Rs. 1,05,000 of employer NPS

• Old regime: wins at Rs. 15 lakh only above Rs. 5.44 lakh of other deductions

  
  

Ask your employer for an NPS salary structure. Then compare both regimes with your real deductions before you submit your declaration for the tax year.

Tax starts because the rebate of up to Rs. 60,000 applies only when taxable income is Rs. 12 lakh or less. For a salary above Rs. 12 lakh, a salaried person reaches that limit at a gross salary of Rs. 12.75 lakh, after the Rs. 75,000 standard deduction. The Union Budget of 1 February 2025 set the rebate, and the Union Budget of 1 February 2026 kept the slabs unchanged.

Marginal relief softens the edge. Just above Rs. 12 lakh of taxable income, your tax cannot exceed the income above the limit. A Rs. 13 lakh salary has taxable income of Rs. 12.25 lakh, so tax is Rs. 25,000 plus Rs. 1,000 cess, or Rs. 26,000.

The Income Tax Act, 2025 applies from Tax Year 2026-27, which covers income earned from 1 April 2026. Rates are unchanged. Section 80C is now Section 123, and Section 80D is now Section 126.

Only 3 deductions matter for most salaried people in the new regime: the standard deduction, employer NPS and interest on a let-out property.

The Finance (No. 2) Act, 2024 raised the employer NPS limit to 14% in the new regime.

On a salary above Rs. 12 lakh, employer NPS saves Rs. 16,380 at Rs. 15 lakh and Rs. 46,800 at Rs. 25 lakh. At Rs. 13 lakh, it removes the tax entirely, which makes it the strongest lever for anyone near the limit.

Assumptions: resident individual below 60, basic pay of 50% of gross salary, employer NPS included in gross salary, Rs. 75,000 standard deduction, 4% cess, no other income.

The contribution comes out of your cash salary. It sits in a retirement account, and the tax saved returns only part of it. Weigh that before you restructure pay.

For a salary above Rs. 12 lakh, such as Rs. 15 lakh, the old regime wins only when deductions beyond the Rs. 50,000 standard deduction exceed Rs. 5.44 lakh. Below that, the new regime costs less.

Formula used: Old-regime tax = slab tax on (salary − Rs. 50,000 − other deductions), plus 4% cess. Break-even taxable income is Rs. 9,06,250, where old-regime tax equals Rs. 97,500.

The new regime costs Rs. 27,300 less here. A large house rent allowance exemption can reverse the result, so test your own figures.

Consider Aditi, a 34-year-old product manager in Bengaluru with a gross salary of Rs. 15 lakh (Rs. 1.25 lakh a month) and a CIBIL Score of 771, who plans a home loan next year.

Formula used: Net cash cost of NPS = employer NPS − tax saved. Loan impact = (cash cost per month × 50%) ÷ Equated Monthly Instalment (EMI) per lakh of Rs. 868.

Aditi weighs a Rs. 16,380 saving against Rs. 4.3 lakh of lower loan eligibility. She restructures only after she locks the loan.

Lenders assess repayment from net monthly income, so any step that lowers take-home pay can lower the loan you qualify for. A regime choice alone does not change your income. NPS restructuring does.

Bajaj Finance offers home loans with the terms below, subject to credit assessment.

Approval timelines can extend where Form 16 and returns disagree, and minimum income thresholds can differ by city. Check your home loan eligibility and read the guide to tax on a Rs. 7 lakh salary.