Tax on 12 Lakh Income

Old Vs. New Tax Slabs as per Union Budget 2025

A quick comparison of old tax slabs and new tax slabs as per the latest Union Budget 2025 is as follows:

Latest Income Tax Slabs (FY 2024-25)

1. Old Tax Regime

• Standard Deduction: ₹50,000

2. New Tax Regime

• Standard Deduction: ₹75,000 (from FY 2024-25, increased from ₹50,000)

Changes in Income Tax Structure for FY 2025-26 (AY 2026-27)

• Standard Deduction:
  • ₹50,000 for old regime
  • ₹75,000 for salaried individuals under the new regime
• Family Pensioners: Deduction limit increased from ₹15,000 to ₹25,000
• NPS/EPF Employer Contribution: Deduction limit raised from 10% to 14% of basic + DA (both regimes)
• Capital Gains Tax:
  • Unlisted bonds/debentures: Now taxed at slab rates (no LTCG benefit)
  • LTCG on listed equity: Exemption up to ₹1.25 lakh, rate is 12.5% (previously 10%)
  • STCG (listed equity/business trusts): Rate increased to 20% (previously 15%)
  • LTCG on other assets: 12.5% (no indexation); previously 20% with indexation
• Securities Transaction Tax (STT):
  - On futures: 0.02%
  - On options: 0.1%

How is ₹12 Lakh Income Tax-Free?

• The tax rebate under Section 87A has been enhanced for FY 2025-26, allowing individual taxpayers with net taxable income up to ₹12 lakh to pay zero tax under the new regime.
• For salaried employees, after accounting for the standard deduction of ₹75,000, the effective tax-free limit is ₹12.75 lakh.
• This means if your salary is ₹12 lakh or less, you owe zero income tax under the new tax regime.
• If your income is slightly above ₹12 lakh, marginal relief ensures you are not taxed disproportionately on the excess income up to ₹12.75 lakh.

Sample Tax Calculation for ₹12 Lakh Salary (New Regime)

Since ₹11,25,000 is below the ₹12,00,000 rebate limit (because of the enhanced Section 87A), your tax payable = ₹0.

Income Tax Exemptions under Old and New Tax Regime for FY 2025-26 (AY 2026-27)

The following table summarizes the key income tax exemptions under both tax regimes for the Financial Year 2025-26 (Assessment Year 2026-27):

Key Points

• Old Regime remains unchanged with its slab rates and deductions.
• New Regime offers full exemption up to ₹12 lakh (₹12.75 lakh for salaried) in FY 2025-26, a major relief for middle-income taxpayers.
• Most deductions and exemptions (like 80C, HRA, 80D) are still not available in the new regime.
• Taxpayers must file returns to claim this rebate and ensure compliance.
• For those with income above ₹12 lakh, standard rates apply as per the slab, with marginal relief up to ₹12.75 lakh.

In Conclusion

Selecting the appropriate tax regime depends on your income level and available deductions. The Old Regime benefits taxpayers with substantial investments and exemptions, while the New Regime offers simplicity and zero tax on incomes up to ₹12 lakh due to enhanced rebates. Evaluating your financial circumstances carefully can help maximize tax savings. Always consider current slab rates and deductions before making your choice for FY 2025-26.