Think You Won’t Pay Tax on ₹12 Lakh Income? Think Again! Here’s What You Need to Know
The new tax regime promises tax-free income up to ₹12 lakh, but not everyone qualifies. Learn why you might still have to pay tax, even if you earn under ₹12 lakh..
Post last updated: February 2, 2025
Think You Won’t Pay Tax on ₹12 Lakh Income? Think Again! Here’s What You Need to Know
The recent announcement making income up to ₹12 lakh tax-free has come as a big relief to millions of taxpayers. But before you celebrate, let’s take a closer look—because not everyone earning ₹12 lakh or less will escape taxation.
While the government has given a much-needed breather to salaried individuals, some incomes don’t qualify for this exemption. That means you could still end up paying tax, even if your total earnings are within the ₹12 lakh limit.
Why Might You Still Have to Pay Tax on ₹12 Lakh Income?
The exemption under Section 87A only applies to certain types of income, like salary or business profits. But if you make money from stock trading, selling property, or crypto investments, you do not get the same benefit.
This is because these incomes fall under separate tax rules, meaning the ₹12 lakh exemption doesn’t fully apply to them. To help you understand better, here are three real-life scenarios where people earning under ₹12 lakh will still have to pay tax.
👉 - Try the fincalci.com Advance Incometax calculator for tax comparision between new tax scheme and old tax scheme. 👈3 Real-Life Scenarios Where You Might Still Owe Taxes
Scenario 1: Ravi – The Stock Market Investor
👉 Ravi is a marketing professional earning ₹10 lakh per year. He also trades in stocks and makes an additional ₹2 lakh profit from short-term investments.
Will Ravi pay tax?
✅ His ₹10 lakh salary is tax-free under the new regime.
❌ But his ₹2 lakh stock trading profit is taxed at 15% (Short-Term Capital Gains tax under Section 111A).
💰 Final tax to be paid: ₹30,000 (₹2,00,000 × 15%).
Scenario 2: Priya – The Freelancer Who Sold Property
👉 Priya is a freelance designer earning ₹9 lakh per year. She also sold a small plot of land she had inherited, making a profit of ₹3 lakh.
Will Priya pay tax?
✅ Her ₹9 lakh freelance income is fully tax-free.
❌ But her ₹3 lakh property sale profit is taxed at 20% (Long-Term Capital Gains tax under Section 112).
💰 Final tax to be paid: ₹60,000 (₹3,00,000 × 20%).
Scenario 3: Amit – The Business Owner Who Invests in Crypto
👉 Amit runs a small business and makes ₹11 lakh per year. He also dabbles in cryptocurrency and earned a ₹1 lakh profit from Bitcoin trading.
Will Amit pay tax?
✅ His ₹11 lakh business income is tax-free under the new regime.
❌ But his ₹1 lakh crypto profit is taxed at 30% (as per crypto tax rules).
💰 Final tax to be paid: ₹30,000 (₹1,00,000 × 30%).
New vs. Old Tax Slabs – What’s Changed?
New Tax Slabs (2025-26 onwards)
| Income Range (₹) | Tax Rate |
|---|---|
| 0 - 4,00,000 | No Tax |
| 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% |
Old Tax Slabs (If You Choose the Old Regime with Deductions)
| Income Range (₹) | Tax Rate |
|---|---|
| 0 - 2,50,000 | No Tax |
| 2,50,001 - 5,00,000 | 5% (with 87A rebate, effective tax = 0) |
| 5,00,001 - 10,00,000 | 20% |
| Above 10,00,000 | 30% |
FAQs: All Your Questions Answered
Q1: Who gets the full tax exemption under the new rule?
✅ If your entire income is salary, pension, or business income, and it is below ₹12 lakh, you won’t have to pay tax under the new regime.
Q2: If I earn ₹12 lakh salary, will I have to pay tax?
✅ No! If your entire ₹12 lakh comes from salary or business income, you are fully exempt under the new regime.
Q3: What if I earn ₹11 lakh from my job and ₹1 lakh from stocks?
❌ You will have to pay tax on ₹1 lakh! The stock trading income will be taxed at 15% under Short-Term Capital Gains tax.
Q4: Can I choose the old tax regime to save tax?
✅ Yes, if you have deductions like HRA, 80C, home loan interest, etc., the old tax regime might save you more money.
Q5: What happens if I have long-term capital gains from shares?
❌ Long-term capital gains above ₹1 lakh are taxed at 10%, no matter what your total income is.
Final Thoughts: Be Smart About Your Taxes!
While ₹12 lakh tax-free income sounds great, not all income is treated equally. If you earn money from stock trading, crypto, or selling property, you may still have to pay tax.
✔ Check your income sources before assuming you won’t pay taxes.
✔ Use a tax calculator to see how much tax you actually owe.
✔ Consider hiring a tax expert if you have multiple income streams.
👉 The key takeaway? Plan your taxes wisely! Don’t get caught off guard—stay informed and make the most of the tax benefits available to you.
Have questions or need support? Feel free to reach out to us!
Email: admin@fincalci.com
