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How to Save Tax for Salary Above 12 Lakhs?

By CA Mohammed S Chokhawala

Updated on: Dec 9th, 2025

4 min read

For the FY 2025-26, taxpayers for an income up to Rs. 12 lakhs can be practically tax-free. The rebate limit has been increased to Rs. 60,000 for an income up to Rs 12 lakhs under the new regime.

Tax Slabs Under The New Tax Regime For FY 2025-26

The revised tax slabs under the new regime for FY 2025-26 (AY 2026-27) are as follows:

Income Tax Slabs	Tax Rate
Up to Rs. 4 lakhs	NIL
Rs. 4 lakhs - Rs. 8 lakhs	5%
Rs. 8 lakhs - Rs. 12 lakhs	10%
Rs. 12 lakhs - Rs. 16 lakhs	15%
Rs. 16 lakhs - Rs. 20 lakhs	20%
Rs. 20 lakhs - Rs. 24 lakhs	25%
Above Rs. 24 lakhs	30%

Tax Calculation for 12 Lakh Income in Old & New Tax Regime

Mr A has a Gross Salary income of Rs. 12 lakhs. He is also eligible to claim an HRA exemption of Rs. 60,000, LTA exemption of Rs. 20,000, and Profession tax of Rs 2,400. He further invested Rs. 1.5 lakhs in PPF, Paid medical insurance premium of Rs. 50,000 for parents (Senior Citizen), Paid Interest on Education loan of Rs. 25,000. Tax calculation under new and old tax regimes will be as under:

Tax Computation For FY 2025-26 Under The Old & New Tax Regime

Particular	Old Tax Regime (For FY 2025-26)	New Tax Regime (For FY 2025-26)
Gross Salary u/s 17(1)	12,00,000	12,00,000
Less: Exemption u/s 10
HRA Exemption	60,000	NA
LTA Exemption	20,000	NA
Reimbursement	NA	NA
Children's education and hostel allowance	NA	NA
Less: Deduction u/s 16
Standard deduction	50,000	75,000
Deduction of Professional Tax Paid	2,400	NA
Income under the Head Salary	10,67,600	11,25,000
Less: Deduction under Chapter VI-A
Section 80C	1,50,000	NA
Section 80D	50,000	NA
Section 80E	25,000	NA
Net Total Income	8,42,600	11,25,000
Income Tax (Including Surcharge and Cess)	84,261	52,500
Less: Rebate u/s 87A	0	52,500
Tax Liability (Including Cess)	84,261	0

For a taxpayer having a total income of Rs. 12 lakhs in FY 2025-26, opting for the new tax regime will be more beneficial as the tax liability will be Zero. Thus, resulting in tax savings of Rs. 84,261.

How to Save Taxes for 12 Lakh Salary?

Irrespective of the regime you choose, you can consider the below points to derive maximum benefits of the deductions available under the Income Tax Act.

Claim standard deduction - Rs 75,000 under the new regime and Rs 50,000 under the old regime.
Choose the most beneficial regime. The old regime has more deductions and lower slab rates; the new regime has fewer deductions and higher slab rates. (higher slab rates are more beneficial - higher slab does not mean higher tax rates)
Section 80CCD(2) allows deduction for contribution made by employer in National Pension Scheme (NPS), under both old (usually 10% of basic pay)and new regime (14% of basic pay).
If the assessee has rented out his property (residential or commercial building), entire interest due can be claimed as a deduction under section 24.
Exemption is available for the amount received as gratuity and leave encashment at the end of the employment tenure. The employee may either retire or terminate the employment before retirement.

Final Word

If you learn the intricacies of the taxation system, you can judiciously use the old and new tax regimes to save taxes. If you want to opt for the old tax regime, invest in schemes like the National Pension Scheme (NPS), Equity Linked Savings Scheme (ELSS) Investment, Sukanya Samridhhi Yojana (SSY), and many more. If you wish to opt for the new tax regime, you can still plan your investments and save yourself from paying hefty taxes by claiming a deduction under Standard deduction, Employer contribution to NPS etc.

Frequently Asked Questions

How to claim a tax rebate under section 87A?

While filing your income tax return, if your taxable income is up to Rs.12 lakhs (Rs 5 lakhs under the old regime) after incorporating all the applicable deductions and exemptions, you can receive a tax rebate of up to Rs.60,000 (Rs. 12,500 under the old regime).

What tax deductions do Agniveers get under section 80CCH?

Agniveers who work in the Indian Armed Forces can claim a deduction equal to the amount they deposit in the Agniveer Corpus Fund once they get enrolled in the Agnipath Scheme.

What is the limit for tax deduction under section 80D?

Section 80D offers tax deductions on insurance premiums for medical policies. If you are paying insurance premiums for yourself, the deduction permitted is Rs.25,000. If you pay the premium for both yourself and your parents below 60, the deduction permitted is Rs.50,000. If your parents are above 60, the tax benefit shoots up to Rs. 75,000.

How is the house rent allowance calculated?

You can claim the entire house rent allowance or your rent if it is less than 10% of the basic salary and DA. If you reside in a non-metro city, you can claim 40% of your salary (Basic+DA) and 50% of your salary (Basic+DA) if you stay in a metro city.

What is the maximum tax benefit you can claim under children's allowance?

You can claim a maximum tax exemption of Rs.1,200 per year on children allowance offered by your employer. However, this is allowed for a maximum of two children.

Which tax regime is better for 12 lakhs income for FY 2025-26?

The new regime is beneficial as there is zero tax liability for income upto Rs.12 lakhs for FY 2025-26.

Can you pay zero tax on Rs 12 lakhs salary ?

Yes , You can pay Zero tax on Rs 12 lakhs salary by claiming deduction and exemption like HRA exemption , 80C deduction , Standard deduction , Housing loan interest etc. Provision to pay zero tax on Rs 12 salary exists in the new tax regime by leveraging all the existing deduction and exemption.

What is in hand salary for Rs. 12 lakhs salary?

Your in-hand salary for Rs 12 lakhs will depend upon the CTC , PF contribution , PT deduction , TDS deduction. You can use our in hand calculator to compute the same.

About the Author

CA Mohammed S Chokhawala

Content Writer

I'm a chartered accountant, well-versed in the ins and outs of income tax, GST, and keeping the books balanced. Numbers are my thing, I can sift through financial statements and tax codes with the best of them. But there's another side to me – a side that thrives on words, not figures. Read more

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