Under the new tax regime for FY 2025-26 (AY 2026-27), income up to ₹12,00,000 is completely tax-free. The revised slabs produce ₹60,000 tax on ₹12 lakh, and the enhanced Section 87A rebate of ₹60,000 cancels it in full. For salaried people the ₹75,000 standard deduction pushes the zero-tax point to a gross salary of ₹12,75,000. The old regime does not give this benefit — its 87A rebate stays at ₹12,500 up to ₹5 lakh.
How ₹12 Lakh Income Becomes Zero Tax
Zero tax at ₹12 lakh is not a higher exemption limit — it is tax computed on the slabs, then wiped out by the Section 87A rebate. Here is the exact computation for a ₹12 lakh taxable income and for a ₹12.75 lakh salaried person.
₹12,00,000 taxable income (new regime)
₹12,75,000 gross salary → zero tax
The ₹12 lakh zero-tax applies exclusively under the new tax regime, which is now the default. Under the old regime the 87A rebate is only ₹12,500 and stops at ₹5 lakh income. If your Form 26AS / employer defaults you to old, you must opt into new to get this benefit.
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Open the Tax Calculator →New Regime Tax Slabs — FY 2025-26
The revised new-regime slabs announced in Budget 2025. A 4% Health & Education Cess applies on the tax after rebate; surcharge starts above ₹50 lakh.
| Income Slab | Rate | Tax on Slab |
|---|---|---|
| Up to ₹4,00,000 | Nil | ₹0 |
| ₹4,00,001 – ₹8,00,000 | 5% | ₹20,000 |
| ₹8,00,001 – ₹12,00,000 | 10% | ₹40,000 |
| ₹12,00,001 – ₹16,00,000 | 15% | ₹60,000 |
| ₹16,00,001 – ₹20,00,000 | 20% | ₹80,000 |
| ₹20,00,001 – ₹24,00,000 | 25% | ₹1,00,000 |
| Above ₹24,00,000 | 30% | 30% on balance |
Section 87A rebate of ₹60,000 makes total tax nil for taxable income up to ₹12,00,000. Plus 4% cess on the tax after rebate.
Tax Payable at Different Income Levels
For a salaried person under the new regime (₹75,000 standard deduction). Below ₹12 lakh taxable income the 87A rebate cancels the tax; above it, tax is payable at slab rates.
| Gross Salary | Net Taxable | Tax Before Rebate | 87A Rebate | Net Tax (+4% cess) |
|---|---|---|---|---|
| ₹8,00,000 | ₹7,25,000 | ₹16,250 | ₹16,250 | ₹0 |
| ₹10,00,000 | ₹9,25,000 | ₹32,500 | ₹32,500 | ₹0 |
| ₹12,00,000 | ₹11,25,000 | ₹52,500 | ₹52,500 | ₹0 |
| ₹12,75,000 | ₹12,00,000 | ₹60,000 | ₹60,000 | ₹0 |
| ₹13,00,000 | ₹12,25,000 | ₹63,750 | — | ₹66,300 |
| ₹15,00,000 | ₹14,25,000 | ₹97,500 | — | ₹1,01,400 |
| ₹20,00,000 | ₹19,25,000 | ₹2,01,250 | — | ₹2,09,300 |
Net tax figures include the 4% Health & Education Cess. Non-salaried individuals get zero tax up to ₹12,00,000 total income (no standard deduction).
Compare your liability under both regimes side by side.
Old vs New Calculator →Marginal Relief on Income Slightly Over ₹12 Lakh
To avoid a cliff where crossing ₹12 lakh by ₹1 triggers a large tax, marginal relief caps the tax so it never exceeds the income earned above ₹12 lakh. Example: at ₹12,10,000 taxable income, the ₹10,000 above the threshold means the tax cannot exceed ₹10,000, even though the computed tax is higher.
- Marginal relief applies to taxable income just above ₹12,00,000 (roughly up to ~₹12.75L, where slab tax and the excess income meet).
- It caps tax at the amount of income above ₹12 lakh — so a tiny overshoot costs only a tiny tax.
- Beyond that band, normal slab rates apply with no relief; cess is then added.
Old vs New — Where ₹12 Lakh Zero-Tax Stands
Old regime — 87A up to ₹5 lakh
- 87A rebate ₹12,500 (income up to ₹5 lakh)
- Standard deduction ₹50,000
- Chapter VI-A (80C, 80D, HRA, home-loan) available
- Can beat new regime only with heavy deductions
- Must be actively opted into
New regime — zero-tax to ₹12 lakh
- 87A rebate ₹60,000 (income up to ₹12 lakh)
- Standard deduction ₹75,000
- Most Chapter VI-A deductions not available
- Default regime from AY 2024-25 onward
- Best for most salaried up to ₹12.75 lakh
New regime suits you if
- Your income (or salary after ₹75K SD) is at/under ₹12L
- You claim few deductions / investments
- You want the simplest zero-tax outcome
Check the old regime if
- You have large 80C, home-loan interest and HRA claims
- Deductions push old-regime tax below new-regime tax
- You are 60+ and use the higher basic exemption
The ₹12 lakh figure is a rebate threshold, not an exemption. Add even ₹1 of special-rate income — short-term capital gains (20%) or long-term capital gains (12.5%) — and that portion is taxed separately, outside the 87A rebate. Salary plus a small capital gain can still leave a bill even when total income looks under ₹12 lakh.
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