Tax on 12 Lakh Income

The Union Budget 2025 has introduced significant changes to the income tax regime, impacting how individuals with an income of ₹12 lakh are taxed. This income level often places individuals squarely in the middle class, making tax implications a crucial aspect of their financial planning. The budget's focus on simplifying the tax structure and providing relief to this segment is evident in the announced revisions. Let's delve into how the 2025 budget impacts your ₹12 lakh income.

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Tax on Income of ₹12 Lakhs: 2025 Budget Highlights

The 2025 Union Budget has brought some key changes that directly impact individuals earning ₹12 lakhs annually. Here are the highlights you need to know:

No Tax up to ₹12 Lakhs: A significant announcement is that no income tax will be levied on income up to ₹12 lakhs. This provides substantial relief to those in this income bracket.
Income Tax Slab Changes: The income tax slabs have been revised. While the full details are forthcoming, these changes are likely to impact how the portion of your income above ₹12 lakhs is taxed. It's essential to review the new slab structure once released to understand your tax liability.
New Income Tax Bill: A new Income Tax Bill is on the horizon, promising further simplification and efficiency in the tax system. This could bring additional changes that will affect your overall tax calculation.
TDS/TCS Rationalization: Rationalization of TDS (Tax Deducted at Source) and TCS (Tax Collected at Source) aims to simplify compliance. This could make it easier to manage your tax obligations.

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:

Post–Budget New Tax Regime (FY 2025-26)		Pre-Budget New Tax Regime (FY 2024-25)
Tax Slab for FY 2023-24	Tax Slab	Tax Slab for FY 2024-25	Tax Slab
0 to Rs 4,00,00	NIL	Below ₹ 3 lakhs	Nil
Rs 4,00,000 to Rs 8,00,000	5%	₹ 3 lakh - ₹ 7 lakh	5%
Rs 8,00,0001 to Rs 12,00,000	10%	₹ 7 lakh - ₹ 10 lakh	10%
Rs 12,00,001 to 16 lakh rupees	15%	₹ 10 lakh - ₹ 12 lakh	15%
Rs 16,00,001 to 20 lakh rupees	20%	₹ 12 lakh - ₹ 15 lakh	20%
Rs 20,00,001 to 24 lakh rupees	25%	More than 15 lakh	30%
Above 24 lakh	30%	-	-

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Key Considerations for ₹12 Lakh Income Earners:

New vs. Old Regime: Carefully evaluate whether the new tax regime or the old regime (with deductions) is more beneficial for you. While there's no tax up to ₹12 lakhs, the tax on the portion above that amount, combined with available deductions in the old regime, needs to be compared.
Review the New Slabs: Once the full details of the revised income tax slabs are released, calculate your tax liability under both the new and old regimes to make an informed decision.
Consult a Tax Advisor: For personalized advice tailored to your specific financial situation, it's always recommended to consult with a qualified tax advisor. They can help you optimize your tax planning and make the best choice for your income level.

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^The tax benefits under Section 80C allow a deduction of up to ₹1.5 lakhs from the taxable income per year and 10(10D) tax benefits are for investments made up to ₹2.5 Lakhs/ year for policies bought after 1 Feb 2021. Tax benefits and savings are subject to changes in tax laws.
¶Long-term capital gains (LTCG) tax (12.5%) is exempted on annual premiums up to 2.5 lacs.
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