How to Income Tax Calculate Tax on Rs 12 Lakh Income

As the financial year 2025-26 approaches, taxpayers earning more than Rs 12 lakh per annum must be aware of their income tax liability. The Indian tax system offers two tax regimes – the old tax regime with deductions and exemptions, and the new tax regime with lower slab rates but fewer deductions. Let’s explore how to calculate your income tax for FY 2025-26 and maximize your tax savings.

Understanding Income Tax Slabs for FY 2025-26

New Tax Regime (Default System)

The new tax regime introduced in Budget 2020 and revised in Budget 2023 offers lower tax rates but minimal deductions. Here’s how it applies:

Income Slab (Rs)	Tax Rate
Up to 3,00,000	Nil
3,00,001 – 6,00,000	5%
6,00,001 – 9,00,000	10%
9,00,001 – 12,00,000	15%
12,00,001 – 15,00,000	20%
Above 15,00,000	30%

Old Tax Regime (With Deductions)

The old regime allows deductions like 80C (Rs 1.5 lakh), 80D (Health Insurance), and HRA Exemption. The tax rates are:

Income Slab (Rs)	Tax Rate
Up to 2,50,000	Nil
2,50,001 – 5,00,000	5%
5,00,001 – 10,00,000	20%
Above 10,00,000	30%

How to Calculate Income Tax on Rs 12 Lakh+ Income?

For taxpayers earning Rs 12 lakh annually, let’s compare the tax liability under both regimes.

New Tax Regime Calculation for Rs 12 Lakh

Up to Rs 3,00,000 – No Tax
Rs 3,00,001 – 6,00,000 – 5% of Rs 3,00,000 = Rs 15,000
Rs 6,00,001 – 9,00,000 – 10% of Rs 3,00,000 = Rs 30,000
Rs 9,00,001 – 12,00,000 – 15% of Rs 3,00,000 = Rs 45,000
Total Tax Before Cess = Rs 90,000
4% Health & Education Cess = Rs 3,600
Total Tax Payable = Rs 93,600

Old Tax Regime Calculation for Rs 12 Lakh (With Deductions)

If you claim deductions (e.g., Rs 1.5 lakh under 80C, Rs 50,000 standard deduction, and Rs 25,000 under 80D), your taxable income reduces to Rs 9.75 lakh.

Up to Rs 2,50,000 – No Tax
Rs 2,50,001 – 5,00,000 – 5% of Rs 2,50,000 = Rs 12,500
Rs 5,00,001 – 9,75,000 – 20% of Rs 4,75,000 = Rs 95,000
Total Tax Before Cess = Rs 1,07,500
4% Health & Education Cess = Rs 4,300
Total Tax Payable = Rs 1,11,800

Which Tax Regime is Better?

If you have high deductions (HRA, 80C, 80D, home loan interest), the old regime is beneficial.
If you don’t claim many deductions, the new tax regime saves more.

Tips to Reduce Your Tax Liability

Maximize Section 80C investments (PPF, EPF, ELSS, FD, Life Insurance)
Claim HRA Exemption if living in a rented house
Use Section 80D for Health Insurance premium deductions
Opt for NPS (Section 80CCD) for additional Rs 50,000 deduction
Leverage home loan interest deductions under Section 24(b)

Conclusion

Calculating your income tax for FY 2025-26 is crucial to avoid last-minute tax burdens. Use an income tax calculator to compare regimes and choose the best option for tax savings. Plan your investments wisely and stay updated with tax law changes.