Comparison of Tax on ₹12 Lakh Income: FY 2024-25 vs. FY 2025-26 for Individual Taxpayers
Taxes play a vital role in personal finance. Understanding tax changes each year helps individuals plan better, make informed financial decisions, and optimize savings. This blog compares the tax liability on a ₹12 lakh income under the old and new tax regimes for FY 2024-25 and FY 2025-26.
We will also consider the latest tax slabs under the new tax regime for AY 2026-27 to provide a comprehensive comparison.
Tax Regimes in India: Old vs. New
Before diving into the tax calculations, it is important to understand the two tax regime options available in India:
Old Tax Regime
Allows taxpayers to reduce taxable income using deductions and exemptions.
Sections like 80C, 80D, and HRA offer tax-saving benefits.
Follows a progressive tax structure where rates increase with income.
New Tax Regime
Introduced in 2020 with lower tax rates.
Does not allow most deductions and exemptions.
It is optional, and taxpayers can choose between the old and new regimes based on their financial situation.
Tax Slabs for the New Regime (AY 2026-27)
The tax slabs under the new regime for AY 2026-27 are:
| Income Slab (₹) | Tax Rate (%) |
|---|---|
| Up to ₹4,00,000 | 0% |
| ₹4,00,001 – ₹8,00,000 | 5% |
| ₹8,00,001 – ₹12,00,000 | 10% |
| ₹12,00,001 – ₹16,00,000 | 15% |
| ₹16,00,001 – ₹20,00,000 | 20% |
| ₹20,00,001 – ₹24,00,000 | 25% |
| Above ₹24,00,000 | 30% |
Tax Calculation for ₹12 Lakh Income (Old Regime)
For comparison, let’s calculate the tax liability under the old tax regime while considering common deductions:
Assumed Deductions:
Section 80C: ₹1,50,000 (PPF, ELSS, etc.)
Section 80D: ₹25,000 (Health insurance premium)
HRA Exemption: ₹1,20,000 (Assuming ₹10,000 per month as HRA)
Total Deductions: ₹1,50,000 + ₹25,000 + ₹1,20,000 = ₹2,95,000
Taxable Income after Deductions:
₹12,00,000 – ₹2,95,000 = ₹9,05,000
Tax Calculation:
Up to ₹2,50,000: 0% tax = ₹0
₹2,50,001 – ₹5,00,000: 5% of ₹2,50,000 = ₹12,500
₹5,00,001 – ₹9,05,000: 20% of ₹4,05,000 = ₹81,000
Total Tax: ₹12,500 + ₹81,000 = ₹93,500
Health and Education Cess (4%):
4% of ₹93,500 = ₹3,740
Total Tax Liability:
₹93,500 + ₹3,740 = ₹97,240
Comparison of Tax Liability
| Tax Regime | Taxable Income (₹) | Tax Liability (₹) |
|---|---|---|
| Old Regime | ₹9,05,000 | ₹97,240 |
| New Regime | ₹11,50,000 | ₹57,200 |
Difference in Tax Liability: ₹97,240 (Old Regime) – ₹57,200 (New Regime) = ₹40,040
Which Regime is Better?
Deciding between the old and new tax regimes depends on your financial situation, including investments, deductions, and tax-saving goals.
🔹 If you have high deductions (like home loans, 80C investments, and HRA), the old regime may be more suitable.
🔹 If you prefer simplicity and have minimal deductions, the new regime is likely a better choice.
🔹 For lower tax liability, the new regime works better in this ₹12 lakh income scenario.
Future Planning
If you plan to invest in tax-saving schemes, the old regime may be more beneficial in the long run. However, for a straightforward approach with lower tax rates, the new regime is preferable.
Conclusion
The tax liability for a ₹12 lakh income varies significantly between the old and new tax regimes. The old regime allows deductions but results in a higher tax liability of ₹97,240, whereas the new regime, with lower rates, reduces tax to ₹57,200.
Choosing the best regime depends on your investment strategy and ability to claim deductions. Consulting a tax professional or using an online tax calculator can help determine the most suitable option.
By understanding these tax structures, individuals can make informed decisions, ensuring better tax savings and financial planning.