Tax regimes for a 12-lakh salary: Which one’s better?
Ever since the Government made changes to the new tax regime in the Union Budget 2023, there has been quite a lot of noise over the income tax burden. Citizens have been given the option to stick to the old tax regime and pay their taxes, if they find the new tax regime cumbersome or to their disadvantage. But with a salary that touches Rs 12 lakh per annum, it’s always wiser to weigh your options, before you take your pick between the two tax regimes, both of which have their pros and cons. Based on that, it’s easy to plan the best tax savings investments too.
The New Tax Regime
After the changes, the new tax regime in Union Budget 2023 offers a full tax rebate of up to Rs 7 lakh per annum. But once you cross that mark, the total income over Rs 3 lakh becomes taxable. This is because deductions under section 87A of the Income Tax Act, 1961, are no longer available for annual incomes above Rs 7 lakh. If you earn Rs 12 lakh per annum, this may not be as advantageous.
The Old Tax Regime
You have the option to stay with the old tax regime and pay your taxes, if you make prudent investments in tax saving plans. To start with, it’s important to know the minimum deductions needed under the old tax regime to match your tax liability with those under the new tax regime. If you can claim deductions over that minimum amount, the old regime turns out to be a better bet for those earning over Rs 12 lakh per annum.
Ways to claim higher deductions in the old tax regime
For a salary of Rs 12 lakh per annum, the new tax regime requires you to pay a tax of Rs 90,000. Going by the calculations, for the equal amount of tax under the old regime, the minimum deductions claimed should be Rs 3 lakh. Claiming higher deductions will thus be a gain. Here, there’s a scope to enjoy a complete exemption, if you have the best tax savings investments.
The old tax regime allows savings and investments under sections 80C (insurance premiums and fixed deposits), 80CCD (NPS), 80D (medical insurance premiums), 24B (home loan interest), 10 (10D) (death and maturity benefits of insurance plans), 10(13A) (HRA), 80E (educational loan), 80EEA (affordable housing), 80G (donations to social cause) etc. Tax consultants often advise you to focus not only on tax benefits, but also on a secured future while making investments.
Term insurance plans, pension plans and Unit Linked Insurance Plans (ULIPs) occupy the top spots on the list. A sound term insurance plan will provide solid financial support to your family if you die an untimely death. Whereas, investing in a good pension plan in India will be a source of relief in your retirement years. Meanwhile, the ULIP will protect you with a life cover, offering growing market returns alongside.
Making efficient tax savings can always help you claim more deductions and help you choose the tax regime that best suits you. What remains is a worry-free life!
- Make Your Online Term Plan Your Family's Monthly Pay Cheque
- Calculate and See for Yourself How Starting Young Gives You Lower Premiums
- What is the Age Limit to Buy a Term Insurance Policy?
- Build a Secure Future with an Investment Plan for 25 Years
- Best Tax Saving Investment Options
- What is Liquidity and Its Role in Financial Planning?
Subscribe to get the latest articles directly in your inbox
Life & Term Articles
New Union Budget Highlights 2022-2023
February 05, 2022
Term Insurance Tax Benefits Under Section 80C & 80D
November 14, 2023
Term Insurance Guide
August 16, 2022
Here's all you should know about life insurance.
We help you to make informed insurance decisions for a lifetime.
# The above stated exemptions/deductions and tax benefits are subject to the provisions & conditions mentioned in the existing Income Tax Act, 1961. Tax Laws are also subject to change from time to time.
# It is requested to seek tax advice of your Chartered Accountant or personal tax advisor with respect to your personal tax liabilities under the Income-tax law.
- term insurance plan
- savings plan
- ulip plan
- retirement plans
- health plans
- child insurance plans
- group insurance plans
- long term savings plan
- fixed maturity plan
- monthly income advantage plan
- income tax calculator
- pension calculator
- bmi calculator
- compound interest calculator
- term insurance calculator
- income tax
- tax saving investment options
- best investment plans
- benefits of term insurance calculator
- what is term insurance
- why to invest in life insurance
- tax planning for salaried employees
- how to choose best child insurance plan
- tips for buying retirement plan
- 1 crore term insurance
- importance of saving
- short term saving plans
- types of investment in india
- investment declaration
- Life Insurance
- Union Budget 2023
- New Income Tax Slab 2023-24
- HRA Calculator
- Term Insurance