Income Tax on Rs. 12 Lakh Salary

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.

Income tax slabs under the new tax regime for FY 2025-26 (AY 2026-27)

In the 2025 Budget, the government introduced updated income tax slabs under the new tax regime. The revised structure increases slab ranges to Rs. 4 lakh intervals, and a 25% tax rate was added. These changes aim to simplify taxation while maintaining clarity across different income brackets for FY 2025–26 (AY 2026–27).

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 Rs.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 for FY 2024-25 (AY 2025-26)

Income slab (Rs.)	Old regime tax rate	New regime tax rate (2025)
Up to Rs.2.5 lakh	Nil	Nil
Rs.2.5 lakh – Rs.4 lakh	5%	Nil
Rs.4 lakh – Rs.8 lakh	5%	5%
Rs.8 lakh – Rs.12 lakh	20%	10%
Rs.2 lakh – Rs.16 lakh	30%	15%
Rs.16 lakh – Rs.20 lakh	30%	20%
Rs.20 lakh – Rs.24 lakh	30%	25%
Above Rs.24 lakh	30%	30%

 

Key changes in Budget 2025

The Budget 2025 brought several taxpayer-friendly updates. Firstly, no tax is payable on incomes up to Rs. 12 lakh, thanks to an enhanced rebate under Section 87A. Secondly, tax rates have been reduced for incomes between Rs. 12 lakh and Rs. 24 lakh. Thirdly, while the old regime remains unchanged, it still allows deductions such as 80C and HRA. Note that the new regime restricts many of these traditional exemptions.

Tax saving options under new and old tax regime

Below is a comparative overview of tax-saving opportunities available under the old and new tax regimes:

New tax regime – Allowed deductions

Although limited, certain deductions are still available under the new system:

Deduction type	Details
Standard deduction	Rs. 75,000
Employer’s NPS contribution	Allowed under Section 80CCD(2)
Agniveer Corpus Fund	Deduction under Section 80CCH
Family pension	Deduction as per Section 57(iia)
Conveyance and transport allowance	Applicable, especially for specially-abled individuals
Gratuity and leave encashment	Exempt under Sections 10(10), 10(10AA), 10(10C)
Interest on home loan (Let-out Property)	Deduction allowed under Section 24

Old tax regime – Exemptions and deductions

The old regime offers a wider variety of tax-saving tools, grouped into two categories:

Part A: Benefits under 'Salary'

Component	Tax treatment
Basic and DA	Fully taxable
HRA	Partially exempt (subject to limits)
LTA	Exempt twice in a four-year block
Internet/Mobile reimbursement	Exempt with valid bills
Children's education allowance	Rs. 4,800 annually (up to 2 children)
Food coupons	Up to Rs. 26,400 yearly
Professional tax	Usually Rs. 2,400
Standard deduction	Rs. 50,000

Part B: Deductions under Chapter VI-A

Section	Deduction
80C	Up to Rs. 1.5 lakh (EPF, PPF, ELSS, SSY, NSC, etc.)
80D	Rs. 25,000–50,000 (health insurance)
80E	Interest on education loans (up to 8 years)
80G	Donations to approved charities (50% or 100%)
80DD	Rs. 75,000–1.25 lakh (for disabled dependents)
Section 24(b)	Up to Rs. 2 lakh (home loan interest)

How to save taxes for Rs. 12 lakh salary?

Whether you go with the old or the new tax regime, understanding your tax-saving opportunities can make a noticeable difference. Here’s a breakdown of common strategies to reduce your tax liability:

1. Make use of the standard deduction

This is the simplest and most widely used deduction available to salaried individuals.

• Under the new regime, the standard deduction is Rs. 75,000.

• Under the old regime, it is Rs. 50,000.

You don’t need to provide any investment proof—this deduction is applied automatically.

2. Choose the more beneficial regime

• In the old regime, income up to Rs. 2.5 lakh is tax-free.

• In the new regime, the tax-free threshold is Rs. 3 lakh.

The old regime allows a wider range of deductions (like 80C, 80D, etc.), while the new one offers simpler slab rates with fewer benefits.
Compare both using an online tax calculator based on your actual investments and expenses to see which regime offers lower tax.

3. Claim deduction for employer’s contribution to NPS – Section 80CCD(2)

This benefit is available under both regimes.

Employer type	Old regime	New regime
Government	14% of (Basic + DA)	14% of (Basic + DA)
Private	Not available	14% of (Basic + DA)

4. Exemption on gifts received

If you’ve received gifts (in cash or kind), these are tax-exempt up to Rs. 50,000 per financial year. Any amount above that becomes fully taxable. This applies under both regimes.

5. Interest deduction for let-out property – Section 24

If you have rented out a property and are paying interest on a loan taken for it, you can claim this interest as a deduction. There's no upper limit for this benefit, and it is available under both regimes. Planning on investing in property for your tax planning? Check your eligibility for a home loan from Bajaj Finserv using your mobile number and OTP for verification.

6. Gratuity and leave encashment

Tax exemption is available on gratuity and leave encashment received at retirement or upon leaving employment. This applies to both tax regimes.

7. Deduction for additional employee costs – Section 80JJA

Businesses can claim 30% of additional employee costs as a deduction, regardless of the tax regime selected.

8. Deduction for Agniveer Corpus Fund – Section 80CCH(2)

Eligible Agniveers under the Agnipath Scheme can claim the full amount contributed by the Central Government as a deduction. No cap is applied, and it is applicable under both regimes.

Rs. 12 lakh income tax calculation in old and new tax regime

Let’s understand how taxes are calculated for a gross salary of Rs. 12 lakh in FY 2025–26 under both tax regimes. Suppose Mr A receives an HRA exemption of Rs. 60,000, LTA exemption of Rs. 20,000, and pays Rs. 2,400 as professional tax. He also invests Rs. 1.5 lakh in PPF, pays Rs. 50,000 for his senior citizen parents’ health insurance, and pays Rs. 25,000 towards education loan interest.

Particulars	Old tax regime	New tax regime
Gross Salary	Rs. 12,00,000	Rs. 12,00,000
HRA Exemption	Rs. 60,000	NA
LTA Exemption	Rs. 20,000	NA
Standard Deduction	Rs. 50,000	Rs. 75,000
Professional Tax	Rs. 2,400	NA
Income after Deductions	Rs. 10,67,600	Rs. 11,25,000
Section 80C Deduction	Rs. 1,50,000	NA
Section 80D Deduction	Rs. 50,000	NA
Section 80E Deduction	Rs. 25,000	NA
Net Taxable Income	Rs. 8,42,600	Rs. 11,25,000
Tax Before Rebate	Rs. 84,261	Rs. 52,500
Rebate under 87A	NA	Rs. 52,500
Final Tax Payable	Rs. 84,261	Rs. 0

Conclusion: Choosing the new tax regime in this case results in zero tax liability, saving Rs. 84,261.

Tax computation for FY 2024-25 under the old and new tax regime

Here’s a similar calculation using income figures for the previous financial year (FY 2024–25), keeping exemptions and deductions the same as in the previous example.

Particulars	Old tax regime	New tax regime
Gross Salary	Rs. 12,00,000	Rs. 12,00,000
HRA Exemption	Rs. 60,000	NA
LTA Exemption	Rs. 20,000	NA
Standard Deduction	Rs. 50,000	Rs. 75,000
Professional Tax	Rs. 2,400	NA
Income after Deductions	Rs. 10,67,600	Rs. 11,25,000
Section 80C Deduction	Rs. 1,50,000	NA
Section 80D Deduction	Rs. 50,000	NA
Section 80E Deduction	Rs. 25,000	NA
Net Taxable Income	Rs. 8,42,600	Rs. 11,25,000
Tax Before Rebate	Rs. 84,261	Rs. 71,500
Rebate under 87A	NA	NA
Final Tax Payable	Rs. 84,261	Rs. 71,500

Conclusion: In this case, the new tax regime still results in a lower tax payable, even without any deductions.

Income tax slabs for FY 2023-24 (old tax regime)

Income range (Rs.)	Tax rate
Up to Rs. 2.5 lakh	Nil
Rs. 2,50,001 - Rs. 5,00,000	5%
Rs. 5,00,001 - Rs. 10,00,000	20%
Rs. 10,00,001 and above	30%

For individuals earning Rs. 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 Rs. 12 lakh

For taxpayers with an income above Rs. 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. You might already be eligible for favourable terms on a home loan – check your loan offers from Bajaj Finserv by entering your mobile number and OTP.

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: Rs. 50,000 deduction for salaried individuals.

Comparison of Tax Liability: Old vs. New Regime

Description	Amount (Rs.)	Old regime (Rs.)	New regime (Rs.)
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?

• 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 filings

How to calculate income tax on different salary slabs

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

• Rs. 7 lakh: Tax calculation for Rs. 7 lakh salary

• Rs. 12 lakh: Tax calculation for Rs. 12 lakh salary

• Rs. 15 lakh: Tax calculation for Rs. 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.

Other topics you might find interesting
Income Tax Notice Section 142 1​	Section 80CCD 2 of Income Tax Act	Section 194H of Income Tax Act	Section 80CCD 1 of Income Tax Act
Section 148 of Income Tax Act	Section 80GGC of Income Tax Act	Section 80DD of Income Tax Act	Section 80E of Income Tax Act
Home Loan Interest Deduction	Section 80CCD 1B of Income Tax Act	Section 80DDB of Income Tax Act	Section 80G of Income Tax Act
56 2 X of Income Tax Act	Section 194IA of Income Tax Act	Section 80EEA of Income Tax Act	Section 80GG Deduction of Income Tax Act

Conclusion

Understanding how income tax works allows you to make informed decisions about which regime to choose. If you wish to follow the old tax regime, you can lower your tax burden by investing in schemes like PPF, ELSS, NSC, or Sukanya Samriddhi Yojana. On the other hand, the new regime provides simpler slab rates, and you can still claim a few useful deductions like the standard deduction and employer’s NPS contribution. Planning to buy a house? You can also claim home loan benefits through Bajaj Finserv, which can support your financial planning while potentially reducing your taxable income. You might already be eligible – check your loan offers now by entering your mobile number and verifying with an OTP.

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 lak

 

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