The Income Tax Department in India follows a progressive tax system, where the tax rate increases as income rises. However, you can save a lot through tax deductions. There are several tax-saving options available to reduce your tax burden. Here, we will explain how you can bring your tax to zero, even with an annual income of INR 12 lakh, by using reimbursements and investments.

Steps to Save Tax on INR 12 Lakh Income

1. Adjust Your Salary Structure

First, contact your company’s HR and request changes in your salary structure. These changes may include:

  • HRA (House Rent Allowance): INR 3.60 lakh per year
  • LTA (Leave Travel Allowance): INR 10,000 per year
  • Phone Bill Reimbursement: INR 6,000 per year

On an income of INR 12 lakh, you can also claim:

  1. Standard Deduction (Section 16): INR 50,000
  2. Professional Tax Exemption: INR 2,500
  3. HRA Deduction (Section 10(13A)): INR 3.60 lakh
  4. LTA Deduction (Section 10(5)): INR 10,000
2. Claim INR 1.5 Lakh Deduction Under Section 80C

After the above deductions, your taxable income reduces to INR 7,71,500. You can further reduce it by claiming INR 1.5 lakh under Section 80C through:

  • LIC Premiums
  • Investments in PPF, EPF, NPS, NSC
  • Children’s Tuition Fees
3. Additional Deduction Under Section 80CCD

If you are a central government employee or have invested in the Tier-1 NPS scheme, you can claim an additional deduction of INR 50,000 under Section 80CCD. After these deductions (INR 1.50 lakh + INR 50,000 = INR 2 lakh), your taxable income will further reduce to INR 5,71,500.

4. Claim Tax Exemption on Health Insurance (Section 80D)

Under Section 80D, you can claim:

  • INR 25,000 for the health insurance premium of yourself, your spouse, or your children.
  • INR 50,000 for health insurance of your senior citizen parents.
5. Pay Zero Tax!

With an additional deduction of INR 75,000 under Section 80D, your taxable income reduces to INR 4,96,500, which means you will not have to pay any tax!

Disclaimer: The information provided in this article is for general knowledge and educational purposes only. Tax rules and exemptions may vary based on individual circumstances and government policies. Please consult a financial advisor or tax expert before making any financial decisions.