How to Pay Zero Tax on ₹12 Lakh Salary?
How to Pay Zero Tax on ₹12 Lakh Salary?
Smart Tax-Saving Plan Under the Old Regime for FY 2024–25
If your annual salary is around ₹12,00,000, you may assume that a large chunk will go to taxes. But with smart planning and the right deductions, it is possible to bring your taxable income close to nil, especially under the old tax regime.
"Can I pay zero tax on ₹12 lakh salary?"
Yes, in many cases, you can. Let’s break down how.
✅ Step 1: Choose the Right Tax Regime
You must opt for the old tax regime because it allows multiple deductions and exemptions. The new tax regime, though offering lower tax rates, does not allow popular deductions like 80C, 80D, HRA, and home loan interest.
So if your goal is zero or minimal tax, the old regime is your best friend.
🧾 Step 2: Claim Deductions to Reduce Taxable Income
Here’s how to reduce your taxable salary from ₹12,00,000 to below the taxable limit using legitimate deductions:
🔹 1. Standard Deduction – ₹50,000
All salaried individuals get this automatically.
Remaining taxable salary = ₹11,50,000
🔹 2. Section 80C – Up to ₹1,50,000
Invest in:
• PPF / EPF
• ELSS mutual funds
• LIC premiums
• 5-year tax-saving FDs
• Tuition fees for children
• Principal repayment of the home loan
Remaining taxable salary = ₹10,00,000
🔹 3. Section 24(b) – Home Loan Interest (₹2,00,000)
If you have a home loan, claim interest on self-occupied property.
Remaining taxable salary = ₹8,00,000
🔹 4. Section 80D – Health Insurance (₹75,000 max)
• ₹25,000 for self/spouse/children
• ₹50,000 for senior citizen parents
If you’ve taken a family floater + parent policy, claim full ₹75,000.
Remaining taxable salary = ₹7,25,000
🔹 5. Section 80CCD(1B) – NPS (₹50,000 Extra Over 80C)
Invest in National Pension System (Tier 1 account).
Remaining taxable salary = ₹6,75,000
🔹 6. HRA Exemption – Up to ₹1,50,000 (example estimate)
If you live in a rented house and receive HRA, claim exemption under Section 10(13A).
Remaining taxable salary = ₹5,25,000
🔹 7. Education Loan Interest – Section 80E (If applicable)
If you’re repaying an education loan, claim full interest with no limit.
Let’s assume ₹1,25,000 interest paid.
Remaining taxable salary = ₹4,00,000
🧮 Final Tax Calculation
| Particulars | Amount (₹) |
| Gross Salary | ₹12,00,000 |
| Less Deductions (All Combined) | ₹8,00,000 approx. |
| Taxable Income | ₹4,00,000 |
| Tax Payable | Zero (due to 87A rebate) |
As per Section 87A, if your taxable income after all deductions is ₹5 lakh or less, your tax liability is reduced to zero.
✅ You pay ₹0 tax legally, and also build long-term wealth through these investments.
🧠 Smart Planning Tips
• Start your tax-saving investments early in the year to avoid a last-minute rush
• Choose instruments that align with your goals (retirement, education, insurance)
• Use employer benefits like HRA, LTA, food allowance, etc., to further reduce tax
• Maintain receipts, rent proofs, and investment records
✅ Final Words
If used wisely, the deductions under the old tax regime can help you legally bring your taxable income to ₹5 lakh or less, triggering the Section 87A rebate, which brings your final tax to zero.
