Zero Tax on Rs. 12 Lakh Salary? 5 Key Points to Clear the Doubts

The Budget 2025, presented by Finance Minister Nirmala Sitharaman, introduced changes for tax slabs. Individuals earning up to Rs. 12 lakh will not have to pay tax under the new tax regime in the Financial year 2025-26. However, the new rules come with certain conditions. Therefore, it becomes crucial for salaried individuals to understand these changes to plan their finances better. Here are some key points to clear your doubts.

The old tax regime remains same

The benefit of paying no tax on income upto Rs. 12 lakh is only under the new tax regime and not under the old tax regime. The old tax regime remains the same. Additionally, this benefit does not apply to income from assets that are taxed at special rates as per the Income-tax Act, 1961.

Moreover, under the new tax regime, individuals cannot avail of benefits from tax-saving investments as it does not allow deductions against tax-saving investments. This benefit can only be availed under the old tax regime.

There is a difference between taxable salary and full salary package

The tax is payable on your taxable salary, not your full salary package. The taxable salary is calculated by deducting all tax exemptions and deductions from the full salary package. Therefore, the taxable salary differs from your total cost-to-company (CTC) or full salary package.

No tax even when the salary is above Rs. 12 lakh under the new tax regime

The new tax regime allows taxpayers to claim deductions, including the standard deduction of Rs. 75,000 and the employer’s contribution towards PF and the NPS. Because of this, you will not have to pay tax even if your full salary package exceeds Rs. 12 lakh. However, if your taxable salary is more than Rs. 12 lakh, you will have to pay tax as per the applicable tax slabs and rates.

Determine which tax regime is best suited for you by using the income tax calculator

With the start of the 2025-26 financial year, it’s time to inform or update your preferred tax regime with your employer. Before making a choice, it’s important to evaluate both tax regimes to see which one maximizes your benefits and saves more money. You can use an income tax calculator that will help you make a well-informed decision.

New Tax Regime Benefits Won’t Apply for ITR Filing in July 2025

You will file your income tax return in July 2025 for the income earned in the previous year, i.e., FY 2024-25. The new slabs and rates introduced in Budget 2025 will not apply to the ITR filing. The changes made in the tax slabs and rates will apply to your income earned between April 2025 and March 2025.