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How To Save Tax For Salary Above 12 Lakhs?

Q: 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 old tax regime by leveraging all the existing deduction and exemption. However under the new tax regime due to limited deductions and exemptions, paying zero tax on Rs. 12 lakhs is a rare possibility.

Q: 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.

By Mohammed S Chokhawala

Updated on: Jul 24th, 2024

11 min read

In India, the income tax department has set up a progressive tax regime, meaning the tax rates keep increasing with your income. However, by familiarising yourself with effective tax reduction strategies, you can benefit a lot. You can opt for various tax-saving measures to reduce your tax burden.

Budget 2024 Updates

As per the latest Finance Act 2024, changes have been made in the slab rate for the new tax regime applicable for FY 24-25 as follows -

Tax Slab	Tax Rate
upto ₹ 3 lakh	Nil
₹ 3 lakh - ₹ 7 lakh	5%
₹ 7 lakh - ₹ 10 lakh	10%
₹ 10 lakh - ₹ 12 lakh	15%
₹ 12 lakh - ₹ 15 lakh	20%
more than ₹ 15 lakh	30%

In the new tax regime, the standard deduction has been increased from Rs.50,000 to Rs.75,000, and the deduction on family pension has also been increased from Rs.15,000 to Rs.25,000.

Take a look at this article if you are looking for tips on how to save tax for a salary above Rs 12 lakh.

Tax Slabs Under Old vs New Tax Regime

As per the budget 2023 new regime of tax has been made the default regime, you can opt for either the new or the old regime while filing your taxes. Here is a difference between the two:

Tax Slab	FY 2023-24 Tax Rate (Old tax regime)	Tax Slab	FY 2023-24 Tax Rate (New tax regime)
Up to Rs 2,50,000	Nil	Up to Rs 3,00,000	Nil
Rs 2,50,000 – Rs 5,00,000	5%	Rs 3,00,000 – Rs 6,00,000	5%
Rs 5,00,000 – Rs 10,00,000	20%	Rs 6,00,000 – Rs 9,00,000	10%
Rs 10,00,000 and beyond	30%	Rs 9,00,000 – Rs 12,00,000	15%
NA	NA	Rs 12,00,000 – Rs 15,00,000	20%
NA	NA	Rs 15,00,000 and beyond	30%

If you file your taxes according to the new regime, you cannot avail the deductions available under Section 80C to 80U and certain other tax benefits/exemptions are restricted to old regime only. To calculate your tax liability using both regimes, you may use the old vs new tax regime calculator.

Tax Saving Options Under New And Old Tax Regime

Let us take a look at the new and old tax regime tax slab to get an idea regarding how much tax you need to pay in case your income is above Rs 12 lakh:

New Tax Regime (FY 2023-24)

Unlike previous financial years, you can now claim certain deductions if you opt for the new tax regime. The Union Budget 2023-24 announced a list of tax deductions that you can claim under the new tax regime, which is applicable for the financial year 2023-24 and onwards:

Standard Deduction
Deduction for Agniveers under Section 80CCH
Deduction of employer’s contribution to National Pension Scheme under Section 80CCD(2)
Family pension as per section 57(iia)
Conveyance Allowance
Transport Allowance with respect to physically challenged.
Exemption on voluntary retirement 10(10C), gratuity u/s 10(10) and Leave encashment u/s 10(10AA)
Interest on Home Loan on the let-out property (Section 24)
Transport allowances in case of a specially-abled person.

Old Tax Regime (FY 2023-24)

Now let us check out all the exemptions and deductions applicable in case you opt to pay your tax using the old tax regime:

Part 1- Benefits available under the head Salary

You can find out your salary structure from the CTC, which generally looks like:

Salary Component	Taxability
Basic	Fully-taxable
Dearness Allowance	Fully-taxable
House Rent Allowance (HRA)	Exempt up to a certain limit. Calculate now
Leave Travel Allowance (LTA)	Actual travel ticket expenses are exempt for two years in a block of four years under 10(5). Read more
Mobile/ Internet reimbursement	Exempt if: – used predominantly for office purposes – proofs/bills submitted
Children's Education and Hostel Allowance	Rs. 4800 per child (max 2 children)
Food	Rs. 50 per meal (max 2 meals a day) Annual = Rs. 26,400 (50222 days*12 months)
Professional Tax	Generally Rs 2,400 (Varies from state to state)
Standard Deduction	Rs 50,000 (Will be given to all without any restrictions)

Part 2- General Deductions

When you are tax planning for salary above 10 lakhs, you can get deductions on the following:

Paying health insurance policy premium (Section 80D)	Self, your spouse, and your dependent children: Rs 25,000 (Rs 50,000 if aged 60 and above) Parents: Rs 25,000 (Rs 50,000 if aged 60 and above)
Opting for an education loan (Section 80E)	Interest deduction for 8 years from the year of repayment of loan taken for the higher education of yourself, your spouse, dependent children, or a student of whom you are the legal guardian
Donating to charity (Section 80G)	50% or 100% of the eligible amount for notified institutions.
Investing in tax saving instruments (Section 80C)	Tax benefit of Rs.1,50,000 per year. You can invest in the following options: – Employees’ Provident Fund (EPF) – Public Provident Fund (PPF) – Equity Linked Saving Scheme funds (ELSS) – Home loan repayment and Stamp duty – Sukanya Smriddhi Yojana (SSY) – National Savings Certificate (NSC) – Fixed Deposit for 5 years, and more
Costs to treat disabled dependents (Section 80DD)	If you have disabled dependents for whom you bear medical expenses, you are eligible for the tax relief: – 40% disability: Rs.75,000 – 80% or severe disability: Rs.1,25,000
Deductions on home loan payments	Principal amount: Upto Rs 1.5 lakhs u/s 80C Interest amount: Upto Rs 2 lakhs paid under secton/s 24b
The maturity amount of a Life Insurance Policy	Maturity proceeds are tax-exempt if the sum assured is ≤: – 20%: policies issued before 1 April 2012 – 10%: policies issued after 1 April 2012 – 15%: policies issued after 1 April 2013 for a person with disability or disease. – Exemption is applicable in case of ULIP only if the annual premium does not exceed Rs 2,50,000 (From 1st April 2021) – Exemption is applicable in case of Life insurance other than ULIP only if the annual premium does not exceed Rs. 5,00,000 (From 1st April 2023 onwards)
Standard Deduction	Rs 50,000 (Will be given to all without any restrictions)

Calculation Of Tax Under Old And New Tax Regime

Mr A has a Gross Salary income of Rs. 12.5 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:

Particular	Old Tax Regime	New Tax Regime
Gross Salary u/s 17(1)	12,50,000	12,50,000
Less: Exemption u/s 10
HRA Exemption	60,000	❌
LTA Exemption	20,000	❌
Reimbursement	NA	❌
Children's education and hostel allowance	NA	❌
Less: Deduction u/s 16
Standard deduction	50,000	50,000
Deduction of Professional Tax Paid	2,400	❌
Income under the Head Salary	11,17,600	12,00,000
Less: Deduction under Chapter VI-A
Section 80C	1,50,000	❌
Section 80D	50,000	❌
Section 80E	25,000	❌
Net Total Income	8,92,600	12,00,000
Income Tax (Including Surcharge and Cess)	94,660	93,600
Less: Rebate u/s 87A	0	0
Tax Liability (Including Cess)	94,661	93,600

In the above example, the new tax regime is more beneficial in comparison to the old tax regime inspite of the deduction and exemption claimed. This is because the new tax regime provides lower tax slab rates. However, if more deductions are available to the taxpayer then the old tax regime will be beneficial.

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.

Related Articles:

How To Save Tax For Salary Above 7 Lakhs?

How To Save Tax For Salary Above 10 Lakhs?

How To Save Tax For Salary Above 15 Lakhs?

How To Save Tax For Salary Above 20 Lakhs?

How To Save Tax For Salary Above 30 Lakhs?

How To Save Tax For Salary Above 50 Lakhs?

How To Save Tax For Salary Above 1 Crore?

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Frequently Asked Questions

How to claim a tax rebate under section 87A?

While filing your income tax return, if your taxable income is less than Rs.5,00,000 after incorporating all the applicable deductions and exemptions, you can receive a tax rebate of up to Rs.12,500 under the old regime and Rs.25,000 in case of the new 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?

If you have an income of Rs 12 lakhs, the best regime for you will depend on the tax deductions you are eligible for:
If Rs 12 lakh is your salary income-

Select Old regime: if tax-saving investments > Rs. 3,00,000
Select New regime: if tax-saving investments < Rs 3,00,000

If Rs 12 lakh is your non-salary income-

Select Old regime: if tax-saving investments > Rs. 3,12,500
Select New regime: if tax-saving investments < Rs 3,12,500

This requires comparative analysis which is based on your Salary income , Exemption and deduction applicable for your income. You can use our tax calculator and check which is the best option.

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 old tax regime by leveraging all the existing deduction and exemption. However under the new tax regime due to limited deductions and exemptions, paying zero tax on Rs. 12 lakhs is a rare possibility.

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

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

Quick Summary

India's progressive tax regime involves increasing tax rates based on income; exploring tax-saving strategies is crucial. Budget 2024 updates include changes in tax slabs and standard deductions. Understanding the old vs. new tax regime differences, available deductions in salary structures above Rs 12 lakh, and tax calculation methods can help maximize tax savings.