Get the Tata Capital App to apply for Loans & manage your account. Download Now

Blogs

SUPPORT

Menu  
 
Apply Now
Apply Now

Tata Capital > Blog > Generic > Income tax on a 12 lakh salary: Calculation, deductions & how to save

Generic

Income tax on a 12 lakh salary: Calculation, deductions & how to save

Income tax on a 12 lakh salary: Calculation, deductions & how to save

Tax season is one of the most stressful times of the year for working citizens. Tax liabilities can quickly eat into your income and leave you with far less money for investments than you would like.

However, if you are in the 12 lakh tax slab, the new tax regime is cause for celebration, with some much-needed tax relief.

This article will explore the updated income tax on 12 lakhs income under the new regime and help you decide which tax regime, old or new, is best for you.

Income tax slab for a 12 lakh salary in Budget 2026

The Union Budget for the fiscal year 2026-27 continues to keep the following guidelines announced in the previous budget:

  1. No income tax on a 12 lakh salary or less due to increased rebate up to Rs. 60,000.
  2. Tax slab rates for the fiscal year 2026-27 under the new tax regime:

Total income in rupeesRate of tax
Up to 4 lakh0%
4 to 8 lakh5%
8 to 12 lakh10%
12 to 16 lakh15%
16 to 20 lakh20%
20 to 24 lakh25%
Over 24 lakh30%

Old vs new regime: Income tax on a 12 lakh salary

The tax revisions introduced in the new tax regime significantly decrease tax burdens for individuals with income up to Rs. 12 lakh, allowing them to enjoy zero income tax due to the increased rebate.

Rates for income tax on Rs. 12 lakh to 24 lakh have also been lowered.

The following table illustrates the differences in income tax slabs between the old and new tax regimes:

Total income in rupeesTax rate in the old regimeTax rate in the new regime (2026)
Up to Rs. 2.5 lakh0%0%
Rs. 2.5 lakh – Rs. 4 lakh5%0%
Rs. 4 lakh – Rs. 8 lakh5%5%
Rs. 8 lakh – Rs. 12 lakh20%10%
Rs. 12 lakh – Rs. 16 lakh30%15%
Rs. 16 lakh – Rs. 20 lakh30%20%
Rs. 20 lakh – Rs. 24 lakh30%25%
Over Rs. 24 lakh30%30%

While the new tax regime has introduced financial relief for citizens, taxpayers still have the option to choose the old tax regime if they prefer the benefits particular to that regime instead.

Tax deductions & exemptions: Old vs new regime

The new tax regime offers limited deductions in comparison to the old regime:

  1. Tax exemptions, such as House Rent Allowance (HRA) and Leave Travel Allowance (LTA), are no longer available.
  2. Deductions under Section 80C, such as life insurance and PF contributions, have been removed.
  3. Exemptions for transport and medical allowances are also unavailable.

However, there are still valuable savings opportunities provided by the new regime, including:

  1. Rs. 75,000 flat deductions for salaried and pensioned individuals.
  2. Deductions under Section 80CCD (2) include the employer’s contribution to the National Pension Scheme.

Income tax calculation on 12 lakh salary: Detailed example (Old & new regime)

The following example will help you understand how to calculate tax for a 12 LPA salary under both the old and new regimes.

●      New tax regime

  • Gross salary: Rs. 12,00,000
    • Standard deduction: Rs. 75,000
    • Taxable income: Rs. 11,25,000

The income tax slab rates applied to calculate total taxes payable are as follows:

SlabTax rateTax amount (Rs.)
0 – 4,00,000Nil0
4,00,001 – 8,00,0005%20,000
8,00,001 – 11,25,00010%32,500
Total tax before rebate 52,500
Section 87A rebate (52,500)
Total tax payable 0

The new tax regime allows a rebate of Rs. 60,000 under Section 87A. As a result, the total tax on 12 lakh income is zero.

●      Old tax regime

  • Gross salary: Rs. 12,00,000
    • Standard deduction: Rs. 50,000
    • Section 80C (PPF/ELSS/EPF): Rs. 1,50,000
    • Section 80D (Health insurance): Rs. 50,000
    • Section 80CCD (1B) NPS: Rs. 50,000
    • Home loan interest (Section 24): Rs. 95,000
    • Total deductions: Rs. 3,95,000
    • Taxable income: Rs. 8,05,000

SlabTax rateTax amount (Rs.)
0 – 2,50,000Nil0
2,50,001 – 5,00,0005%12,500
5,00,001 – 8,05,00020%61,000
Total tax 73,500
4% cess 2,940
Total tax payable 76,440

The tax on a 12 lakh salary will always be higher under the old regime, even if you have high deductions.

How to save tax for a salary above 12 lakhs: Investment & exemption strategies

If your salary is above Rs. 12 lakh, you can legally reduce your tax burden with proper tax planning. The right strategy depends on whether you choose the old or the new tax regime. Several deductions and exemptions are permitted under the old regime, while lower tax rates with limited deductions apply to the new regime. You must compare both regimes carefully before deciding.

Here’s how to save tax for a 12 lakh income under both regimes through investment and exemption strategies:

Under the new tax regime:

  • Standard deduction: Rs. 75,000 (for salaried individuals)
  • Employer’s NPS contribution (Section 80CCD(2)): Up to 10% of salary (14% for government employees)
  • Family pension deduction: Lower of Rs. 15,000 or 1/3 of pension
  • Gratuity and leave encashment: Exempt up to prescribed government limits

Please note: 80C, 80D, HRA, LTA, and home loan interest on self-occupied property are not allowed in this regime.

Under the old tax regime:

  • Standard deduction: Rs. 50,000
  • Section 80C: Up to Rs. 1,50,000 (PPF, EPF, ELSS, life insurance, principal repayment of home loan)
  • Section 80CCD(1B) NPS: Additional Rs. 50,000
  • Section 80D: Rs. 25,000 (self/family) + Rs. 50,000 (senior citizen parents)
  • Home Loan Interest (Section 24): Up to Rs. 2,00,000
  • HRA & LTA: As per the salary structure and actual expenses
  • Education loan interest (Section 80E): Full interest amount (no limit)

You must choose the regime that gives you a lower overall tax.

Step-by-step: Which regime gives less tax for a 12 lakh income?

Every taxpayer wants to choose the regime that helps in saving taxes. Generally, you must compare the tax calculation under the new and old regimes before deciding. However, if your annual income is Rs. 12 lakh, the new regime is the right choice. It reduces your tax liability to zero. The new regime has lower tax rates and a higher Section 87A rebate. In comparison, the old regime allows you to claim various deductions from your total income. However, it still does not let you make your tax burden zero on a 12 lakh income. 

Which tax regime is better for a 12 lakh salary?

Which tax regime you should opt for will depend on the tax deductions available to you. If you are eligible for several tax deductions and exemptions, then the old tax regime will be optimal for you.

However, if you cannot claim significant deductions, the lower tax rates provided by the new tax regime will be more beneficial for you.

For an annual income of Rs. 12 lakh, consider the following factors:

  1. Salary income of Rs. 12 lakh: Choose the old regime if your tax-saving investments are over Rs. 30,000. Otherwise, go for the new regime.
  2. Non-salary income of Rs. 12 lakh: Opt for the new regime if your tax-saving investments are less than Rs. 3,12,500. Otherwise, the old regime may be more beneficial for you.

Wrapping Up

The new tax regime of 2026 offers much-needed tax relief for the common citizen. However, you may still find value in the old regime. Careful tax planning can help you maximize tax exemptions and boost your savings. Check out the Tata Capital blog to learn how to avail exemptions for tax on 12 lakh income.

Save money on your taxable income and achieve your homeownership goals with Tata Capital’s flexible home loan at attractive interest rates.

To learn more, check the Tata Capital website or download the app.

Popular Searches
Direct Selling Agents 3 lakh loan by government difference between deduction and exemption Loan Sharks what is subsidy CERSAI Charges book value of shares

FAQs

Which tax regime is better for 12 lakhs income?

Your income level will help you choose which regime is best for you. If your salary income is Rs. 12 lakhs and you have tax-saving investments over three lakh rupees, go for the old tax regime. If savings are less than three lakhs, select the new regime. Alternatively, you can select the old regime if you have a non-salary income is Rs. 12 lakhs, and tax-saving investments are over Rs. 3,12,500.

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

For the financial year 2025-26, individuals earning more than Rs. 12 lakhs per year in India will have an income tax rate of 15% to 30%, depending on the individual’s salary.

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

Tax deductions include various tax allowances and exemptions. They help you save money by lowering your taxable income and tax liability. Tax deductions can be claimed under various expenses and investments, such as home loan interest and insurance premiums.

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

You can still claim deductions under Section 80C if your income is over Rs. 12 lakhs. These tax deductions can be claimed for investing in instruments such as National Savings Certificates, Equity-Linked Saving Schemes, and Provident Fund.

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

Individuals aged 60 years or older have a higher basic exemption limit of three lakh rupees. Thus, senior citizens with a Rs. 12 lakh salary only have to pay tax on nine lakh rupees. Section 80TTB also lets senior citizens enjoy a higher interest income exemption limit.

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

High-income earners can benefit from tax deductions under Sections like 24(b) for home loan interest, 80D for health insurance premiums, and 80CCD (2) for employer’s contribution to NPS under the new tax regime.

What is the tax for a 12 lakh per annum salary in India (FY 2025-26)?

Under the new regime, the taxable income on a 12 lakh salary in India is zero. This is due to the standard deduction of Rs. 75,000 and the Section 87A rebate of Rs. 60,000. Under the old regime, tax on a 12 lakh salary depends on deductions claimed. These include 80C investments and home loan interest.

How do I save tax for a 12 lakh income under the old regime?

To save income tax for 12 lakhs per annum salary, you can use deductions of up to Rs. 1.5 lakh under Section 80C and an additional Rs. 50,000 through NPS. You can also use 80D health insurance, HRA, and home loan interest up to Rs. 2 lakh. Higher deductions reduce taxable income and lower your overall tax liability significantly.

Which deductions apply to a 12 lakh income tax under the new tax regime?

The new regime allows Rs. 75,000 standard deduction, employer’s NPS contribution under 80CCD(2), and limited exemptions like gratuity and leave encashment. Popular deductions like 80C, 80D, home loan interest, and HRA are not allowed.

Is it possible to pay zero tax on a 12 lakh salary in India?

Yes. Under the new regime, if taxable income after Rs. 75,000 standard deduction is within Rs. 12 lakh, lower tax rates and Section 87A rebate can make your total tax payable zero. This is inclusive of cess.

Which tax regime is better for a 12 lakh salary: old or new?

The new regime is better if you have fewer deductions and want simpler filing for a 12 lakh salary. The old regime may be better if you invest heavily and claim multiple deductions that significantly reduce taxable income.

Disclaimer

Most Viewed Blogs

Trending Blogs

Calculator

Personal Loan EMI Calculator

Personal Loan EMI Calculator
Home Loan EMI Calculator

Home Loan EMI Calculator
Business Loan EMI Calculator

Business Loan EMI Calculator
Used Car Loan EMI Calculator

Used Car Loan EMI Calculator
Two Wheeler Loan EMI Calculator

Two Wheeler Loan EMI Calculator
Loan Against Securities Calculator

Loan Against Securities Calculator
Loan Against Property Calculator

Loan Against Property Calculator
More Tools
Our Subsidiaries
Our Private Equity Funds

Useful Links and Resources

Policies, Codes & Other Documents

Tata Capital Solutions & Services

Copyright © 2026 Tata Capital Limited

error-icon

Uh oh, something went wrong

Please try again later.

Most Important Terms & Conditions - Home Loans

Download in your preferred language

Download