Earning a salary above Rs. 12 lakh in India places individuals in higher tax brackets, significantly affecting take-home pay. Choosing the right tax-saving strategies can help reduce tax liabilities and increase savings. With the government offering two tax regimes—the old and the new—taxpayers must select the best option based on deductions, exemptions, and lower rates.
This article will provide an in-depth comparison of tax slabs, deductions, and exemptions to help salaried individuals optimise their tax payments.
Income tax slabs – old vs. new tax regime
| Income range (Rs.) | Old tax regime rate | New tax regime rate |
| 0 – 2,50,000 | Nil | Nil |
| 2,50,001 – 5,00,000 | 5% | 5% |
| 5,00,001 – 10,00,000 | 20% | 10% |
| 10,00,001 – 12,00,000 | 30% | 15% |
| Above 12,00,000 | 30% | 20% |
How tax calculation differs under both regimes
Using a
new tax regime calculator can simplify tax calculations. Below is a comparative table:
| Income level (Rs.) | Old tax regime calculation | New tax regime calculation |
| Up to 5 lakh | Nil | Nil |
| 5 lakh to 10 lakh | 20% on amount above Rs. 5 lakh | 10% on amount above Rs. 5 lakh |
| Above 10 lakh | 30% on amount above Rs. 10 lakh | 20% on amount above 10 lakh |
Tax saving options under new and old tax regime
Both tax regimes offer ways to save on
income tax. The old regime allows deductions under sections like 80C, 80D, and others. The new regime offers lower tax rates but fewer deductions.
New tax regime (FY 2025-26)
| Income range (Rs.) | Tax rate |
| Up to 4,00,000 | Nil |
| 4,00,001 - 8,00,000 | 5% |
| 8,00,001 - 12,00,000 | 10% |
| 12,00,001 - 15,00,000 | 15% |
| Above 15,00,000 | 30% |
Standard deduction
The new tax regime offers a standard deduction of Rs. 75,000, reducing taxable income effectively.
New tax regime (FY 2024-25)
| Income range (Rs.) | Tax rate |
| Up to 3,00,000 | Nil |
| 3,00,001 - 7,00,000 | 5% |
| 7,00,001 - 10,00,000 | 10% |
| 10,00,001 - 12,00,000 | 15% |
| Above 12 lakh | Higher rates |
Tax slab 2025 vs 2024
| Income range (Rs.) | FY 2024-25 rate | FY 2025-26 rate |
| Up to 3 lakh | Nil | Nil |
| 3 lakh to 7 lakh | Up to 5% | Up to 5% |
| 7 lakh to 10 lakh | Up to 10% | Up to 10% |
| Above 10 lakh | Up to 30% | Up to 30% |
Old tax regime (FY 2024-25)
Under the
old income tax regime, individuals can claim multiple exemptions and deductions.
Section 80C, 80D, 80E, etc.
80C: Investments in ELSS, PPF, FD, etc.
80D: Medical insurance premiums.
80E: Interest on education loans.
House Rent Allowance (HRA) benefits
Employees living in rented accommodation can claim HRA benefits, reducing taxable income.
Other key exemptions
Leave travel allowance (LTA)
Professional tax deductions
NPS contributions
Tax calculation steps
- Determine total income.
- Choose between old and new tax regimes.
- Apply applicable exemptions or deductions.
- Use slab rates to compute tax liability.
- Adjust tax with rebates or credits.
These features make VRR an important tool in the RBI’s monetary policy framework.
Examples for Rs. 10 lakh salary under both regimes
The table below outlines the calculation under the old and new regimes for
income tax on Rs. 10 lakh salary:
| Regime | Tax calculation |
| Old regime | Rs. 1,12,500 |
| New regime | Rs. 90,000 |
Examples for Rs. 12 lakh salary under both regimes
The table below outlines the calculation under the old and new regimes for
income tax on Rs. 12 lakh salary:
| Regime | Tax calculation |
| Old regime | Rs. 1,72,500 |
| New regime | Rs. 90,000 |
Examples for Rs. 13 lakh salary under both regimes
| Regime | Tax calculation |
| Old regime | Rs. 2,02,500 |
| New regime | Rs. 1,20,000 |
Examples for Rs. 20 lakh salary under both regimes
| Regime | Tax calculation |
| Old regime | Rs. 4,05,000 |
| New regime | Rs. 3,00,000 |
Conclusion
Choosing between tax regimes depends on income, deductions, and personal financial goals. The new tax regime benefits individuals who prefer simplicity and lower tax rates, while the old tax regime is better for those maximising deductions.
A home loan can also provide significant tax benefits under section 80C and section 24(b). Bajaj Housing Finance
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