How to Pay Zero Tax for Income Upto 12 Lakhs Legally

This article provides tips on how to pay zero tax for income up to ₹12 lakhs in India, including investment strategies and smart use of deductions.

How to Pay Zero Tax for Income Upto 12 Lakhs? – Imagine earning ₹12 lakh annually and paying zero income tax—sounds impossible? It isn’t! Many salaried individuals overpay due to a lack of tax planning. Learn how to leverage exemptions, deductions, and rebates to bring taxable income to zero.

How to Pay Zero Tax for Income Upto 12 Lakhs?

Reduce tax liability to zero by using deductions under Section 80C (₹1.5 lakh), 80D (₹75,000), 80CCD(1B) (₹50,000), and Section 24(b) (₹2 lakh). Claim the standard deduction (₹50,000) and House Rent Allowance (HRA) if applicable. If taxable income falls below ₹7 lakh, the Section 87A rebate eliminates tax entirely.

Who is This Guide For?

This article is ideal for salaried professionals, freelancers, business owners, and investors earning up to ₹12 lakh annually. No prior tax knowledge is required—this guide explains simple, legal tax-saving methods to reduce taxable income effectively.

Eligible Taxpayer Categories

Category	Income Source
Salaried Employees	Salary, HRA, EPF, Standard Deduction
Freelancers	Professional Fees, Business Income
Business Owners	Profits from Small/Medium Businesses
Investors	Rental Income, Dividends, Capital Gains

Why You Can Trust Us?

Many taxpayers overpay due to poor tax planning. Backed by expert insights, official tax slabs, and proven financial strategies, our team ensures accuracy and compliance. For a seamless and optimised tax filing experience, trust Vakilsearch’s ITR services — our experts ensure you’re maximising savings and staying fully compliant with the latest tax regulations, including TDS Filing.

How to Pay Zero Tax on 12 Lakh Income: Step-by-step Guide

Use these deductions and rebates to bring your taxable income to zero.

• Step 1: Maximize Deductions Under Section 80C

  • Invest up to ₹1.5 lakh in:
    • EPF, PPF, NPS (Tier 1), ELSS, or 5-Year FD
  • Here are  Mistakes to Avoid: Not diversifying investments, missing deadlines.

• Step 2: Claim Additional Deductions Under Section 80D

  • ₹25,000 for health insurance (self, spouse, and kids).
  • ₹50,000 for senior citizen parents.

 Tip: A family floater plan covers everyone and saves more tax.

• Step 3: Reduce Home Loan Interest Under Section 24(b)

  • Deduct up to ₹2 lakh on home loan interest.
  • Save your  EMI receipts and loan certificates.

• Step 4: Avail Standard Deduction

  • Flat ₹50,000 deduction for salaried individuals—no paperwork.

• Step 5: Get Extra ₹50,000 Deduction with NPS (Section 80CCD(1B))

  • Contribute beyond ₹1.5 lakh 80C limit for more savings.

• Step 6: Cut Tax with House Rent Allowance (HRA)

  • If paying rent, HRA deduction lowers taxable salary.
  • Formula: Least of:
    • (Actual rent – 10% of salary)
    • HRA received
    • 40% of basic salary (non-metro) / 50% (metro)

• Step 7: Use Section 87A Rebate

  • If taxable income drops below ₹7 lakh (new regime) or ₹5 lakh (old regime), tax = ₹0.

Deduction	Max Limit (₹)
80C (EPF, PPF, ELSS, FD)	1,50,000
80D (Health Insurance)	75,000
24(b) (Home Loan Interest)	2,00,000
Standard Deduction	50,000
80CCD(1B) (NPS)	50,000
HRA	Varies
87A Rebate	Up to 7,00,000

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FAQs: How to Pay Zero Tax for Income upto 12 Lakhs

How much tax will be deducted for ₹12 lakh salary?

Under the new tax regime, the tax on ₹12 lakh is around ₹1.17 lakh after the standard deduction. Under the old regime, tax can be reduced significantly using 80C, 80D, and 24(b) deductions. With proper tax planning, total tax liability can be brought down to zero.

How can I reduce income tax for ₹12 lakh per annum?

Reduce taxable income by claiming ₹1.5 lakh under Section 80C, ₹75,000 under Section 80D, ₹2 lakh on home loan interest (Section 24b), and an additional ₹50,000 under NPS (80CCD(1B)). If taxable income drops below ₹7 lakh (new regime) or ₹5 lakh (old regime), Section 87A rebate applies, making tax zero.

What deductions are available to save income tax for ₹12 lakh salary in India?

Key deductions include ₹1.5 lakh under Section 80C (EPF, PPF, ELSS, FD), ₹75,000 under Section 80D (health insurance), ₹2 lakh under Section 24(b) (home loan interest), ₹50,000 standard deduction, and ₹50,000 under NPS (80CCD(1B)). HRA exemption further reduces taxable income.

How does the tax on ₹12 lakh income under the old regime impact taxpayers?

Under the old tax regime, ₹12 lakh falls in the 30% slab, leading to a tax liability of ₹1.34 lakh before deductions. By claiming all eligible exemptions and deductions, taxable income can be lowered, potentially reducing tax to zero.