I have rooted my phone and have TWRP installed.
I am updating CyanogenMod 11 to 12.
Do I need to do a factory reset/ Clear data partition to proceed or can I do without it?
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Yes, it is always recommended to do an factory reset and wipe cache data after every update or change of firmware to avoid problems.
You will lose all your data anyway so right after flash your new firmware, reboot the phone. You don't say your phone so just do as usual do the factory reset wipe cache reboot it again then done wouldn't spend more than 5 minutes.