How is ₹12 Lakh Income Tax-Free in India?
How is ₹12 Lakh Income Tax-Free in India?
New Tax Regime Breakdown for FY 2024–25 & What to Expect in 2026
If you’ve heard that income up to ₹12 lakh can be made tax-free, you’re probably wondering—
“Is it true? Can I pay zero tax on ₹12 lakh salary?”
Well, the answer is: Not yet fully—but it’s getting there.
This article explains how you can reduce your tax liability on ₹12 lakh income to zero or near-zero using current benefits, and what changes are proposed for FY 2026–27 under the New Tax Bill 2025.
✅ Can ₹12 Lakh Be Tax-Free in FY 2024–25?
As per the current income tax law (FY 2024–25):
- Under the New Tax Regime, income up to ₹7 lakh is fully tax-free through the Section 87A rebate.
- For incomes above ₹7 lakh, you cannot claim this rebate.
- However, your tax liability can still be significantly reduced using available deductions and planning.
Let’s break it down.
🧮 Tax Calculation on ₹12 Lakh (FY 2024–25)
Under New Tax Regime:
| Tax Slab | Amount (₹) | Tax (₹) |
| 0 – 3,00,000 | 3,00,000 | 0 |
| 3,00,001 – 6,00,000 | 3,00,000 | 15,000 |
| 6,00,001 – 9,00,000 | 3,00,000 | 30,000 |
| 9,00,001 – 12,00,000 | 3,00,000 | 45,000 |
| Total Tax (before rebate) | - | ₹90,000 |
| Standard Deduction | ₹50,000 | Adjusted |
| Tax after deductions | - | ₹85,800 (incl. 4% cess) |
So, even under the new regime with minimal deductions, you're paying around ₹85,800 in tax on ₹12 lakh.
✅ But What’s Changing from FY 2026–27?
As per the proposed Income Tax Bill, 2025, which will apply from 1st April 2026:
- Basic exemption limit raised to ₹4,00,000
- Standard deduction increased to ₹75,000
- Section 87A rebate extended up to ₹12 lakh income
This means:
From FY 2026–27 onwards:
- You can earn up to ₹12 lakh
- Claim standard deduction of ₹75,000
- And still pay zero tax due to enhanced rebate benefits
✅ How Can You Reduce Tax on ₹12 Lakh in FY 2024–25?
While 100% tax-free status is not available yet, here’s how to minimize tax liability:
| Tax-saving Option | Amount (₹) |
| Standard Deduction | ₹50,000 |
| NPS under 80CCD(1B) | ₹50,000 |
| Employer NPS under 80CCD(2) | Up to 10% of basic |
| Voluntary Provident Fund | Optional |
| HRA (if living in a rented house) | Based on salary/rent |
By using the old regime and these deductions, you can bring your net taxable income well below ₹5 lakh, making you eligible for the ₹12,500 rebate under Section 87A (old regime) as well.
✅ So, Is ₹12 Lakh Tax-Free Now?
| Financial Year | Regime | Income Tax-Free? |
| FY 2024–25 | New Regime | ❌ (Tax approx ₹85,800) |
| FY 2024–25 | Old Regime | ❌ (Depends on deductions) |
| FY 2026–27 | New Tax Bill 2025 | ✅ (Proposed – Yes) |
Final Words
While ₹12 lakh is not fully tax-free yet, you can still save a lot by:
- Choosing the right tax regime
- Using available deductions smartly
- Preparing for the upcoming changes in the tax structure from FY 2026–27
💡 Tip: If you're in the ₹10–13 lakh income range, speak to a tax advisor early in the financial year to make the most of legal tax-saving tools.
Our tax experts can help you file returns legally and avoid penalties.
👉 https://callmyca.com/business-tax-filing
