Tax on 12 Lakh Income in New Tax Regime FY 2026-27

Yes — tax on ₹12 lakh income is zero under the new tax regime for FY 2026-27. Slab tax on ₹12 lakh comes to ₹60,000, but Section 87A gives a rebate of up to ₹60,000 to resident individuals with taxable income up to ₹12 lakh — wiping the liability out completely. For salaried individuals, the zero-tax limit stretches to ₹12.75 lakh thanks to the ₹75,000 standard deduction. No investments, no proofs, no paperwork.

Try it yourself: use our new tax regime calculator to check your exact liability for any income.

In this guide

• Slab-wise tax calculation for ₹12 lakh (FY 2026-27)
• The ₹12.75 lakh salaried threshold, explained
• Take-home salary and monthly TDS
• What happens just above ₹12 lakh (marginal relief)
• Section 87A rebate: conditions and limits
• Old regime vs new regime at ₹12 lakh
• Common mistakes to avoid
• FAQs

Slab-wise calculation: ₹12,00,000 (FY 2026-27)

No surcharge at this level; with zero tax, no 4% cess either.

The ₹12.75 lakh salaried threshold

This is the number everyone asks about. A salaried employee deducts ₹75,000 first:

₹12.75 lakh salary is the last fully tax-free salary for the salaried. At ₹13 lakh, the rebate disappears and marginal relief takes over (next section).

Take-home salary and monthly TDS

With the new regime declared, your employer should deduct zero TDS. If TDS was cut (e.g. you switched jobs mid-year), file your ITR and claim the refund.

Just above ₹12 lakh: marginal relief

Cross ₹12 lakh of taxable income and the 87A rebate is gone — but marginal relief caps the damage: the extra tax can’t exceed the extra income above ₹12 lakh.

₹13,00,000 salary example:

• Taxable income: ₹12,25,000
• Normal slab tax: ₹63,750
• Excess over ₹12 lakh: ₹25,000 → tax capped at ₹25,000
• Plus 4% cess: ₹1,000 → total ₹26,000 (not ₹66,330)

So moving from a ₹12.75L salary (zero tax) to ₹13L costs only ₹26,000 — the system doesn’t punish you with a cliff. Full explainer: marginal relief in new tax regime.

Section 87A rebate: conditions

• Who: resident individuals (not companies/firms/HUFs at this slab).
• Limit: total taxable income up to ₹12,00,000; rebate up to ₹60,000.
• Not available against income taxed at special rates — equity capital gains (111A/112A), lottery winnings etc. are computed separately.
• Cliff edge: ₹12,00,001 of taxable income = zero rebate. That’s exactly why marginal relief exists.

Old regime vs new regime at ₹12 lakh

The new regime wins by ₹1,17,000. The old regime cannot reach zero here without heroic deductions (80C + HRA + home-loan interest + 80D stacked beyond ₹4.5L+).

Common mistakes to avoid

1. Thinking “₹12 lakh tax-free” applies to taxable income above ₹12L — the rebate needs taxable income ≤ ₹12L; a ₹13L salary is fine (taxable ₹12.25L gets marginal relief, not rebate).
2. Forgetting the standard deduction — salaried threshold is ₹12.75L, not ₹12L.
3. Mixing capital gains into the rebate calculation — special-rate income is excluded.
4. Choosing the old regime — at ₹12L it manufactures a ~₹1.17L tax bill from nothing.
5. Not updating the employer’s regime declaration, causing needless TDS.

Frequently asked questions

Is income up to ₹12 lakh really tax-free in the new regime?
Yes, for resident individuals in FY 2026-27 — slab tax of ₹60,000 is fully offset by the 87A rebate, provided taxable income doesn’t exceed ₹12 lakh.

What is the zero-tax salary limit for salaried employees?
₹12.75 lakh/year. The ₹75,000 standard deduction brings taxable income to exactly ₹12 lakh, where the rebate wipes out the tax.

I earn ₹12.5 lakh salary. Do I pay tax?
No — taxable income is ₹11.75 lakh, within the rebate limit. Zero tax.

What tax will I pay on ₹13 lakh salary?
About ₹26,000 including cess, thanks to marginal relief capping tax at the income exceeding ₹12 lakh.

Why is there no tax between ₹12L and ₹12.75L salary?
Because the ₹75,000 standard deduction keeps taxable income at or below ₹12 lakh, which is the rebate’s eligibility line.

Does the 87A rebate apply to capital gains?
No — income taxed at special rates (STCG/LTCG on equity, etc.) is excluded from the rebate.

Should I choose the old regime at ₹12 lakh income?
Almost certainly not. The new regime gives zero tax with no deductions; the old regime would cost ~₹1,17,000 at typical deduction levels.

Is filing ITR still mandatory with zero tax?
Yes, if gross income exceeds the basic exemption limit (₹4 lakh, new regime). Zero tax ≠ zero filing requirement.

What if I have two employers in the year?
Each deducts TDS independently; combined income may cross ₹12L taxable. Reconcile in your ITR — marginal relief still protects you just above the line.

Did Budget 2026 change the ₹12 lakh rebate?
No — slabs, the ₹60,000/₹12L rebate, and the ₹75,000 standard deduction are all unchanged for FY 2026-27.

Sources & methodology

• Slab rates, 87A rebate (₹60,000 / ₹12L), standard deduction (₹75,000), and marginal relief per the Income-tax Act as amended up to Budget 2026; cross-checked against the official Income Tax Department calculator.
• Old-regime comparison uses FY 2026-27 old slabs + 4% cess.

Last reviewed: October 2026. For information only — not professional tax advice.