Income Tax on Rs. 12 Lakh Salary

Understand the intricacies of income tax and explore the different ways to save your income tax.
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Income Tax on Rs. 12 Lakh Salary
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2 min read
19 January 2024

The tax structure in India undergoes periodic changes and being well informed can help you optimise your tax liability. Read on to understand the income tax slabs, deductions, and exemptions applicable to those with an annual income of Rs. 12 lakh, exploring both the new and old tax regimes.

Annual Income

Income Tax Rate

Up to Rs. 2.5 lakh

Nil

Rs. 2.5 lakh – Rs. 4 lakh

Nil

Rs. 4 lakh – Rs. 5 lakh

5%

Rs. 5 lakh – Rs. 8 lakh

5%

Rs. 8 lakh – Rs. 10 lakh

10%

Rs. 10 lakh – Rs. 12 lakh

10%

Rs. 12 lakh – Rs. 16 lakh

15%

Rs. 16 lakh - Rs. 20 lakh

20%

Rs. 20 lakh - Rs. 24 lakh

25%

More than Rs. 24 lakh

30%

 

Comparison of Old Vs. New Income Tax Slabs as per Union Budget 2025

The Union Budget 2025 has introduced major tax relief for individuals, with a rebate ensuring zero tax liability for income up to ₹12 lakh under the new tax regime. This revision significantly reduces the tax burden for middle-class taxpayers.

Income Tax Slabs: Old vs. New Regime (2025)

Income Slab (₹)

Old Regime Tax Rate

New Regime Tax Rate (2025)

Up to ₹2.5 lakh

Nil

Nil

₹2.5 lakh – ₹4 lakh

5%

Nil

₹4 lakh – ₹8 lakh

5%

5%

₹8 lakh – ₹12 lakh

20%

10%

₹12 lakh – ₹16 lakh

30%

15%

₹16 lakh – ₹20 lakh

30%

20%

₹20 lakh – ₹24 lakh

30%

25%

Above ₹24 lakh

30%

30%

 

Key Changes in Budget 2025

  1. Zero Tax for Income up to ₹12 Lakh: Due to a higher rebate under Section 87A, taxpayers earning up to ₹12 lakh will not pay any income tax.
  2. Lower Tax Rates for Higher Incomes: Reduced tax rates for incomes between ₹12 lakh and ₹24 lakh.
  3. No Changes in the Old Regime: Taxpayers can still opt for the old regime if they prefer deductions like 80C, HRA, etc.

Income Tax Slabs for FY 2023-24 (Old Tax Regime)

Income Range (₹)

Tax Rate

Up to ₹2.5 lakh

Nil

₹2,50,001 - ₹5,00,000

5%

₹5,00,001 - ₹10,00,000

20%

₹10,00,001 and above

30%


For individuals earning ₹12 lakh or more, the old tax regime may still be beneficial due to higher deduction options.

Deductions and Exemptions Under the New Tax Regime

Unlike the old regime, the new tax regime has limited deductions. Below are the key tax-saving options available under the new tax regime:

  1. Standard Deduction: A flat deduction of ₹50,000 for salaried and pensioned individuals under Standard deduction.
  2. Deductions under Section 80CCD (2): Employer’s contribution to National Pension Scheme (NPS) can be claimed under Section 80CCD (2).
  3. No Exemptions for Allowances: Perks like House Rent Allowance (HRA), Leave Travel Allowance (LTA), and deductions under Section 80C (like PF contributions, life insurance, etc.) are not available.
  4. No exemptions for transport and medical allowances: Unlike the old regime, these deductions are removed.

Minimum Deductions Required If Income Exceeds ₹12 Lakh

For taxpayers with an income above ₹12 lakh, maximizing deductions is crucial. Here are some key deduction options under the old tax regime:

  1. Section 80C Deductions: Investments in EPF, PPF, ELSS, NSC, Life Insurance Premiums, etc.
  2. Home Loan Interest (Section 24(b)): Deduction on home loan interest paid.
  3. Health Insurance Premiums (Section 80D): Tax benefit on health insurance for self, spouse, children, and parents.
  4. National Pension Scheme (Section 80CCD): Additional deduction for individual contributions.
  5. Education Loan Interest (Section 80E): Deduction for education loan interest.
  6. Standard Deduction: ₹50,000 deduction for salaried individuals.

Comparison of Tax Liability: Old vs. New Regime

Description

Amount (₹)

Old Regime (₹)

New Regime (₹)

Income

12,50,000

12,50,000

12,50,000

Standard Deduction

50,000

50,000

50,000

Professional Tax

2,400

2,400

–

Gross Total Income

11,97,600

11,97,600

12,00,000

Less: Deduction u/s 80C

1,50,000

1,50,000

–

Total Taxable Income

10,47,600

10,47,600

12,00,000

Income Tax Payable

–

1,26,780

90,000

Education Cess (4%)

–

5,071

3,600

Total Tax

–

1,31,851

93,600

 

Which Tax Regime is Better?

  • If you have significant deductions and exemptions, the old tax regime could be more beneficial.
  • If you do not claim many deductions, the new tax regime provides a lower tax rate and simpler filing.

How to Calculate Income Tax on Different Salary Slabs

For better understanding, taxpayers can calculate tax liability based on different salary slabs:

  • ₹7 lakh: Tax calculation for ₹7 lakh salary
  • ₹12 lakh: Tax calculation for ₹12 lakh salary
  • ₹15 lakh: Tax calculation for ₹15 lakh salary

It is essential to assess individual tax-saving options before choosing between the old vs. new tax regime. Make an informed decision based on your financial goals and tax-saving potential.

Know how to calculate income tax on different salary slabs

Salary amount

Calculate income tax for different salary slab:

Rs. 7 lakh

Income tax on Rs. 7 lakh

Rs. 15 lakh

Income tax on Rs. 15 lakh

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Frequently asked questions

What is the income tax rate for individuals earning more than Rs. 12 lakh in a year in India?

For the financial year 2023-2024, individuals earning Rs. 12 lakh or more fall under the 30% tax bracket.

What are tax deductions, and how can they help in reducing my tax liability?

Tax deductions are exemptions or allowances that reduce your taxable income, subsequently lowering your tax liability. These deductions can be claimed for various expenses like investments, insurance premiums, and home loan interest.

Can I claim deductions under Section 80C if my income is above Rs. 12 lakh?

Yes, individuals with an income above Rs. 12 lakh can still claim deductions under Section 80C for investments in specified instruments such as Provident Fund, National Savings Certificates, and Equity-Linked Savings Schemes (ELSS).

Are there any tax-saving investment options beyond Section 80C for high-income earners?

Yes, high-income earners can explore deductions under Sections like 80D for health insurance premiums, 24(b) for home loan interest, and 80CCD (2) for employer's contribution to NPS in the new tax regime.

Can I claim deductions for my children’s education expenses if my income exceeds Rs. 12 lakh?

While there are no specific deductions for children's education expenses, you can explore exemptions for tuition fees under Section 80C or education loans under Section 80E, irrespective of your income.

How can I calculate my income tax on a salary of Rs. 12 lakh?

To calculate your income tax on a salary of Rs. 12 lakh, use an income tax calculator. Input your salary details, including any deductions and exemptions, to get an accurate tax liability. The income tax calculator considers the latest tax slabs and rules for precise calculations.

Can I use an online income tax calculator to estimate my tax liability on a Rs. 12 lakh salary?

Yes, you can use an online income tax calculator to estimate your tax liability on a Rs. 12 lakh salary. These calculators consider current tax slabs, deductions, and exemptions to provide accurate tax estimates, helping you plan your finances effectively and understand your tax obligations.

Are there any specific tax benefits for senior citizens with a Rs. 12 lakh salary?

Yes, senior citizens, aged 60 years and above, get specific tax benefits. They have a higher basic exemption limit of Rs. 3 lakh. So on a Rs. 12 lakh salary, they would only have to pay tax on Rs. 9 lakh. Additionally, senior citizens also benefit from a higher interest income exemption limit under section 80TTB.

How much tax do I pay on ₹12 lakhs?

The tax on a ₹12 lakh annual salary depends on the chosen tax regime:

  • New Tax Regime (FY 2024-25): Approx. ₹78,000 (after deductions like standard deduction).
  • Old Tax Regime: Tax varies based on exemptions and deductions (e.g., Section 80C, 80D).

Use an income tax calculator to get an exact amount.

Is a ₹12 lakh salary zero tax?

No, a ₹12 lakh salary is taxable. However, under the old tax regime, by claiming exemptions like 80C (₹1.5 lakh), 80D, and HRA, the taxable income can be reduced significantly.

How much tax will I pay on a ₹12,00,000 salary?

Under the new tax regime, the approximate tax liability is ₹78,000 after the ₹50,000 standard deduction. The exact amount may vary based on available deductions under the old regime.

How much TDS is deducted on a ₹12 lakh salary?

TDS is deducted as per the applicable income tax slab:

  • If the employer follows the new tax regime, TDS will be around ₹6,500 per month.
  • Under the old tax regime, deductions like 80C, 80D, and HRA can reduce TDS liability.

It's advisable to submit investment proofs to the employer for lower TDS deductions.

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