Save Tax for Salary Above 12 Lakh

With the Budget 2025 updates, individuals earning up to ₹12 lakh annually are excluded from income tax under the new tax regime. Salaried taxpayers can enjoy an exemption limit of up to ₹12.75 lakhs due to the standard deduction of ₹75,000.

There are various ways to save tax for sala1ry above ₹12 lakhs as per the new tax regime and old tax regime. Below, you will find the methods to save tax in such cases, deduction comparisons, and tax slab updates!

Tax Slabs After Budget for FY 25-26

As per budget updates, the income tax slabs for the Finance Year 2025-2026 (Assessment Year 2026-27) under the new tax regime are as follows:

Tax Slabs for Old & New Tax Regime

Individuals who earn above ₹12 lakh annually must understand the differences between the old and new tax regimes for effective tax planning.

The table below provides a brief overview of the differences between the tax slabs under the old regime and the new regime.

Deductions in Old Tax Regime Vs New Tax Regime

Under the Old Tax Regime, various deductions allow you to save tax for a salary above ₹12 lakh. The New Tax Regime includes a higher standard deduction.

You can opt for deductions under the Old Tax Regime or New Tax Regime accordingly after you check the table below.

Ways to Save Tax Above 12 Lakhs in New Tax Regime

Under the New Tax Regime introduced in the Union Budget 2025, individuals with a salary of over ₹12 lakh will not have access to the deductions and exemptions as it is available only in the Old Regime.

However, you can still save tax in the New Tax Regime in the following ways:

• A standard deduction of ₹75,000 is available that directly reduces the taxable income.
• Deduction of up to 10% of salary as per the Employer’s contribution to the National Pension Scheme (NPS) under Section 80CCD(2).
• Conveyance allowance
• Family pension as per Section 57(iia)
• Transport allowance for the physically disabled.
• Exemption on voluntary retirement under Section 10(10C), gratuity under Section 10(10), and leave encashment under Section 10(10AA).
• Interest on home loan as per Section 24.
• Deduction for Agniveer Corpus Fund under Section 80CCH.

Save Tax Above 12 Lakhs in Old Tax Regime

If you are choosing the Old Tax Regime (FY 2024-2025), here are some of the tax saving options you can make use of to save tax above ₹12 lakh.

• Standard deduction of ₹50,000.
• Deductions on home loan payments.
• Up to ₹50,000 deduction on health insurance for self & family, under Section 80D.
• 50% or 100% tax deduction on eligible charities under Section 80G.
• Interest deduction for up to 8 years for education loan under Section 80E.
• HRA deduction & other allowances.

Choose the Most Beneficial Regime

No matter the tax regime you choose, you will have access to the standard deductions that come with it. That is, for the Old Tax Regime, it is ₹50,000, and for the New Tax Regime, it is ₹75,000.

However, in regard to the exemptions and other deductions, here’s how you can choose the most beneficial regime:

• The old tax regime includes various deductions with low slab rates, and the new tax regime consists of limited deductions with high slab rates.
• Using the respective tax slabs, calculate the tax payable under both regimes.
• Compare the tax liabilities to determine which regime results in lower tax liability.

Note that lower tax slab rates result in higher tax payments. Whereas, higher tax slab rates result in higher deductions.

Besides, if your taxable income is marginally above the tax slab you can also consider, opting for marginal tax relief for tax savings.