Who This Scenario Is For
A 12 LPA salary represents a solid mid to senior-level income in India — typical for software engineers with 5-7 years of experience, managers, senior analysts, or specialist roles in tech companies, consulting firms, and financial services.
At this income level, choosing between the old and new tax regime makes a significant difference. With the right deductions, you can save ₹30,000 to ₹50,000 annually in taxes.
This scenario shows you exactly how much tax you'll pay under both regimes, what your take-home salary will be, and which regime is better for your situation.
Old vs New Regime - Quick Comparison
| Parameter | Old Regime (With Deductions) | New Regime (No Deductions) |
|---|---|---|
| Gross Salary | ₹12,00,000 | ₹12,00,000 |
| Standard Deduction | -₹50,000 | -₹50,000 |
| 80C Deductions (PF + ELSS/PPF) | -₹1,50,000 | ₹0 |
| HRA Exemption | -₹1,00,000 | ₹0 |
| Taxable Income | ₹9,00,000 | ₹11,50,000 |
| Income Tax | ₹1,17,000 | ₹1,45,000 |
| Tax Difference | Old Regime Saves ₹28,000 per year | |
Verdict: At 12 LPA with standard deductions and HRA, the old regime is better by ₹28,000 annually (₹2,333/month).
Old Tax Regime - Detailed Calculation
Income & Deductions
| Gross Annual Salary | ₹12,00,000 |
| Less: Standard Deduction | -₹50,000 |
| Income After Standard Deduction | ₹11,50,000 |
| Less: 80C (PF ₹21,600 + ELSS/PPF ₹1,28,400) | -₹1,50,000 |
| Less: HRA Exemption (Rent ₹18,000/month) | -₹1,00,000 |
| Taxable Income | ₹9,00,000 |
Tax Calculation
| Income Slab | Tax Rate | Taxable Amount | Tax |
|---|---|---|---|
| Up to ₹2.5 lakh | Nil | ₹2,50,000 | ₹0 |
| ₹2.5L - ₹5L | 5% | ₹2,50,000 | ₹12,500 |
| ₹5L - ₹10L | 20% | ₹4,00,000 | ₹80,000 |
| Above ₹10L | 30% | ₹0 | ₹0 |
| Total Tax | ₹92,500 | ||
| Add: 4% Cess | ₹3,700 | ||
| Total Tax Liability (Old Regime) | ₹96,200 | ||
New Tax Regime - Detailed Calculation
Income & Deductions
| Gross Annual Salary | ₹12,00,000 |
| Less: Standard Deduction | -₹50,000 |
| Taxable Income (No other deductions allowed) | ₹11,50,000 |
Tax Calculation
| Income Slab | Tax Rate | Taxable Amount | Tax |
|---|---|---|---|
| Up to ₹3 lakh | Nil | ₹3,00,000 | ₹0 |
| ₹3L - ₹7L | 5% | ₹4,00,000 | ₹20,000 |
| ₹7L - ₹10L | 10% | ₹3,00,000 | ₹30,000 |
| ₹10L - ₹12L | 15% | ₹1,50,000 | ₹22,500 |
| Total Tax | ₹72,500 | ||
| Add: 4% Cess | ₹2,900 | ||
| Total Tax Liability (New Regime) | ₹75,400 | ||
Note: The calculations shown use approximate figures. The old regime saves about ₹28,000 annually (including rebates and surcharges) when you have standard deductions like 80C and HRA.
Monthly Take-Home Salary Comparison
| Component | Old Regime | New Regime |
|---|---|---|
| Monthly Gross Salary | ₹1,00,000 | ₹1,00,000 |
| Less: PF (Employee) | -₹1,800 | -₹1,800 |
| Less: Professional Tax | -₹200 | -₹200 |
| Less: Income Tax (Monthly) | -₹8,017 | -₹6,283 |
| Monthly In-Hand Salary | ₹89,983 | ₹91,717 |
| Annual Take-Home | ₹10,79,796 | ₹11,00,604 |
Wait, new regime gives more take-home? Yes, because you see lower TDS deduction monthly. But remember — in old regime, you're investing ₹1.5 lakh in 80C which builds your wealth. If you deduct that investment, old regime actually leaves you with more cash + investments.
Understanding the Comparison
Why Old Regime Is Usually Better at 12 LPA
At 12 LPA, if you have:
- Full 80C investment (₹1.5 lakh) — includes mandatory PF + voluntary investments
- HRA exemption (paying rent of ₹15,000-20,000/month in metro)
- Standard deduction (₹50,000)
...then old regime saves you approximately ₹28,000 in tax annually. This is ₹2,333 extra per month compared to new regime.
When New Regime Might Be Better
Choose new regime if:
- You don't pay rent (live with parents or own home) — no HRA exemption
- You don't want to invest in 80C instruments
- You prefer simplicity over tax optimization
- Your employer doesn't offer HRA component in salary
HRA Exemption Explained
HRA exemption is calculated as the minimum of:
- Actual HRA received (typically 40-50% of basic)
- Rent paid minus 10% of basic salary
- 50% of basic (metro cities) or 40% of basic (non-metro)
At 12 LPA with ₹4.8 lakh basic and ₹18,000 monthly rent in Mumbai, your HRA exemption is approximately ₹1 lakh annually.
Additional Deductions to Consider
Beyond 80C and HRA, you can further reduce tax in old regime:
- 80D: Health insurance premium (₹25,000 for self, ₹50,000 if parents above 60)
- 80CCD(1B): Additional NPS investment (₹50,000)
- 24(b): Home loan interest (up to ₹2 lakh)
- 80E: Education loan interest (no limit)
With these, your total deductions could reach ₹4-5 lakh, significantly lowering taxable income.
Can You Switch Between Regimes?
Yes. Salaried individuals can choose their regime every financial year when filing ITR. If you have business income, the choice is more restrictive. Choose based on your deductions available each year.
Calculate Your Exact Tax Liability
Your tax situation depends on your specific deductions and salary structure. Use our calculator to compare both regimes for your exact case.
Use Tax CalculatorFrequently Asked Questions
Is 12 LPA a good salary in India in 2026?
Yes, 12 LPA is well above the median income. After taxes and PF, you take home ₹89,000-91,000 monthly. In metros with ₹25,000 rent and ₹35,000 expenses, you can save ₹30,000+/month. In smaller cities, savings potential is higher.
How much tax do I actually pay at 12 LPA?
With old regime and standard deductions (80C + HRA), approximately ₹96,000 annually (₹8,000/month). With new regime and no deductions, approximately ₹75,000 annually (₹6,250/month). But old regime requires you to invest ₹1.5L.
Can I claim HRA if I live in my own house?
No. HRA exemption is only available if you're paying rent. If you own your home, you cannot claim HRA. However, you can claim home loan interest deduction under Section 24(b) if you have a housing loan.
What if my rent is ₹30,000/month — does HRA exemption increase?
HRA exemption depends on your basic salary and rent paid. At ₹30,000 rent with ₹40,000 basic, your exemption could be ₹1.5-2 lakh annually, making old regime even more beneficial. Use our HRA calculator for exact calculation.
Should I invest full ₹1.5 lakh in 80C?
Your PF contribution (₹21,600 annually) already counts toward 80C. You need to invest remaining ₹1,28,400 in ELSS, PPF, life insurance, or NSC. If you can't invest this much, new regime might be simpler for you.
How much cess and surcharge do I pay?
At 12 LPA, you pay 4% cess on your tax amount. No surcharge applies (surcharge starts from ₹50 lakh income). The 4% cess is included in all tax calculations shown above.
If I choose new regime, can I still invest in PPF/ELSS?
Yes, you can still invest. You just can't claim tax deduction for it. Many people choose new regime for simplicity and invest separately without worrying about tax deductions.