How to Save Tax on Salary Income of 12 Lakhs in India
Discover how to reduce taxes on ₹12 lakh salary through Section 80C, HRA, NPS, and other smart deductions for 2025.
Anjali Singh
Assistant Manager
Published Date:Nov 1, 2025
Discover how to reduce taxes on ₹12 lakh salary through Section 80C, HRA, NPS, and other smart deductions for 2025.
Anjali Singh
Assistant Manager
As we have been taught throughout our lives, savings are the backbone of financial independence. In April 2025, India’s Finance Minister introduced several changes to the existing income tax slabs. Under the 2025-2026 Union Budget, the changes follow the general progressive taxation. This means that the percentage of tax keeps increasing as the income rises. For the FY 2025-2026, the rebate limit has been increased to ₹60,000, which means that if your taxable income is below 12 lakhs, then you will have no tax liability. This new change would mean that your income under 12 lakhs will effectively be tax-free.
While this is a welcome change, with some smart planning and detailed understanding of the system, you can learn how to save tax on salary income of 12 lakhs. In this article, we have researched some smart ways that will help you reduce the tax on your salary income legally.
The earlier tax regime was flexible and followed traditional tax rates. Similar to the new regime, it followed a progressive taxation policy. Plus, there were a few options for deductions and exemptions that one can claim to reduce their tax.
|
Income Slab |
Tax Rate |
|
Up to ₹ 2.5 Lakhs |
Nil |
|
₹2,50,001 - ₹5,00,000 |
5% |
|
₹5,00,001 - ₹10,00,000 |
20% |
|
Above 10 Lakhs |
30% |
The new tax regime brings in a simpler and progressive taxation policy. Under the Budget 2025, the slab limits were set at 4 lakhs and a new tax rate of 25% was introduced. Plus, it featured fewer exemptions and deductions to streamline the process:
|
Income Slab |
Tax Rate |
|
Up to ₹ 4 Lakhs |
Nil |
|
₹ 4 lakhs - Rs. 8 lakhs |
5% |
|
₹ 8 lakhs - Rs. 12 lakhs |
10% |
|
₹ 12 lakhs - Rs. 16 lakhs |
15% |
|
₹ 16 lakhs - Rs. 20 lakhs |
20% |
|
₹ 20 lakhs - Rs. 24 lakhs |
25% |
|
Above ₹ 24 lakhs |
30% |
While the new tax regime offers a simplified approach, it features fewer opportunities for deductions than the old tax regime.
Here are some options you can choose to save tax on your 12 lakh income.
One of the most popular tax-saving options for Indians earning under 12 lakhs per annum. Under Section 80C of the Income Tax Act, you can avail up to 1.5 lakh in deductions by investing in:
Under this section, you can claim deductions for health insurance premiums.
Section 80E of the ITA can help you save tax by borrowing an education loan. The repayment of the interest every month can reduce the tax rate by a significant margin. Plus, there is no cap or upper limit on this claim. So, if you are searching for how to save tax on salary, applying for an education loan through My Mudra is a great option.
If you reside in a rented house, you can claim House Rent Allowance on your taxes. This will reduce your overall tax rate and help you reduce the liability burden. The amount or rate of HRA depends on several factors:
What if we say that you can claim exemptions on your travel expenses in India? Yes, under the LTA or Leave Travel Allowance, your employer covers your travel expenses.
The new regime brings in lower slabs but limited tax deductions. In this, you can avail tax deductions by Section 80C, 80D, HRA and LTA. Here are some major ways you can save taxes under the new tax regime for your salary of 12 lakhs in India:
A fixed amount of ₹75,000 is offered for all salaried individuals and pensioners. In the old regime, the amount was ₹50,000.
The new tax regime offers a deduction for the contribution of the employer in the National Pension Scheme (NPS). The deduction is available up to 14% of the salary, plus the Dearness Allowance.
EPF and Gratuity are allowed to be tax-free deductions within authorised limits.
Here is a quick and simple example to help you understand the differences between the two tax regimes and their effects on the final tax deductions.
|
Particulars |
Old Regime (₹) |
New Regime (₹) |
|
Gross Salary |
12,00,000 |
12,00,000 |
|
Less: HRA Exemption |
70,000 |
Not Applicable |
|
Less: LTA Exemption |
25,000 |
Not Applicable |
|
Less: Standard Deduction |
50,000 |
75,000 |
|
Less: Professional Tax |
2,400 |
Not Applicable |
|
Taxable Salary |
10,52,600 |
11,25,000 |
|
Less: Section 80C Deduction |
1,50,000 |
Not Applicable |
|
Less: Section 80D Deduction |
40,000 |
Not Applicable |
|
Less: Section 80E Deduction |
20,000 |
Not Applicable |
|
Net Taxable Income |
8,42,600 |
11,25,000 |
|
Tax Payable (including cess) |
83,052 |
52,500 |
|
Less: Rebate under Section 87A |
Not Applicable |
52,500 |
|
Final Tax Liability |
83,052 |
0 |
If you are someone who falls under the bracket of a ₹12 lakh salary in India, knowing the key deductions and tax-saving ways is life-changing. You can enjoy lower tax rates and financial freedom in the long term.
Financial platforms like My Mudra allow you to get deductions through Section 80C and 80E by offering you quick and secure loans. The faster application process and quick funds disbursement make it easy to calculate your finances at the year's end. Plus, My Mudra offers access to over 90+ reputed banks and NBFCs for reliable loans and flexible repayment terms.
Apply for a home loan or education loan from My Mudra and learn how to save tax on 12 lakhs salary.
Also Read:
- How to Save Tax for Salary Above 10 Lakhs in India
- Section 80EEB – Income Tax Deduction on Electric Vehicle Loan
Yes, under Section 80C, you are eligible to avail of deductions up to 2 lakhs on home loan interest, even if your salary is over 12 lakhs.
If you are eligible for a number of deductions such as HRA and Section 80E, then the old regime can be fruitful for you. However, for a simpler and easy process with minimal deductions, the old regime is the best option.
Individuals who are enrolled in the Agnipath Scheme are eligible for the total deposited amount in the fund.
Assistant Manager
Hey there, I'm Anjali Singh. With over 6 years of experience in finance, I specialize in creating content on banking, loans, and financial planning. My goal is to simplify complex financial topics and help readers make informed decisions through my articles.
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