Tax on 12 Lakh Income

Old Vs. New Tax Slabs as per Union Budget 2024

A quick comparison of old tax slabs and new tax slabs as per the latest Union Budget 2024 is as follows: 

Changes in Income Tax Structure for FY 2024-25 (AY 2025-26)

• Standard Deduction: It is now ₹75,000 instead of ₹50,000 for those choosing the new tax regime.

• Family Pensioners: The deduction for family pensioners has increased from ₹15,000 to ₹25,000.

• Capital Gains Tax: Unlisted bonds and debentures will now be taxed at slab rates, no matter how long you have held them.

• Short-Term Capital Gains (STCG): The tax rate on gains from listed equity shares, equity funds, and business trust units is up from 15% to 20%.

• Long-Term Capital Gains (LTCG): The annual exemption limit for gains from equity shares and similar investments has increased from ₹1 lakh to ₹1.25 lakh, with the tax rate rising from 10% to 12.5%.

• LTCG on Other Assets: The tax on long-term gains from other assets has dropped from 20% to 12.5%, but you can no longer use indexation benefits.

• Pension Scheme Benefits: The deduction limit for employer contributions to pension schemes like EPF and NPS has risen from 10% to 14% of your salary.

• Securities Transaction Tax (STT): The STT on futures has increased to 0.02% and 0.1% on options. 

Calculation for Tax on 12 Lakh Salary

Income Tax Calculation for the Above Taxable Income under Old and New Tax Regime:

Key Points to Note:

To determine whether the old or new tax regime is more beneficial for an individual with an annual salary of ₹12 lakhs, let us analyse the tax liabilities under both regimes using the above data.

• The old tax regime results in a lower tax liability (₹46,363.20) compared to the new tax regime (₹63,700) for an individual with an annual income of ₹12 lakhs, given the deductions available in the old regime. Therefore, the old tax regime is more beneficial in this scenario.

• Old tax regime is ideal if you can utilize various deductions through investments and expenses.

• However, it requires more detailed financial planning to maximize deductions under the old tax regime.

• The new tax regime is simpler with few deductions. It is better if you don’t have many deductions to claim.

• Therefore, if you are able to make use of the deductions in the old regime, you will end up paying less tax. But if you prefer simplicity and do not have many deductions, the new regime might be easier, though more expensive in terms of tax liability.

You can use an income tax calculator to get an estimated idea of your tax liability as per old and new tax regimes.

Income Tax Exemptions under Old and New Tax Regime for FY 2024-25 (AY 2025-26) 

The following table summarizes the key income tax exemptions under both tax regimes for the Financial Year 2024-25 (Assessment Year 2025-26):

In Conclusion

If you earn ₹12 lakhs a year in India, the tax you pay will depend on the current tax slabs and any deductions or exemptions you qualify for. Typically, you might end up in the 20% or 30% tax bracket. To reduce your tax bill, make sure you take advantage of deductions under the new and old tax regime.