India New Tax Regime: Why Income up to Rs 12 Lakh Pays No Tax
Many salaried people in India now pay no income tax up to a salary of about 12.75 lakh rupees. It sounds too good to be true, so here is how the new tax regime works, why the number is 12.75 lakh and not 12, and what happens just above it.
The new regime slabs
Under the new regime, tax is charged on taxable income as follows:
| Taxable income | Rate |
|---|---|
| Up to Rs 4,00,000 | Nil |
| Rs 4,00,001 to Rs 8,00,000 | 5% |
| Rs 8,00,001 to Rs 12,00,000 | 10% |
| Rs 12,00,001 to Rs 16,00,000 | 15% |
| Rs 16,00,001 to Rs 20,00,000 | 20% |
| Rs 20,00,001 to Rs 24,00,000 | 25% |
| Above Rs 24,00,000 | 30% |
Why income up to 12 lakh pays nothing
The slab tax on Rs 12,00,000 is Rs 60,000 (Rs 20,000 on the 5% band and Rs 40,000 on the 10% band). The Section 87A rebate under the new regime is up to Rs 60,000 for taxable income up to Rs 12 lakh, so the tax comes down to zero.
Why salaried people can go to about 12.75 lakh
Salaried taxpayers also get a standard deduction of Rs 75,000. A salary of Rs 12,75,000 less Rs 75,000 is Rs 12,00,000 of taxable income, which the rebate wipes out.
What happens just above the limit: marginal relief
A tax cliff would be unfair, so the law caps the tax at the amount by which your income exceeds Rs 12 lakh. A salary of Rs 13,00,000 has taxable income of Rs 12,25,000. The slab tax would be Rs 63,750, but marginal relief limits it to Rs 25,000, and with the 4% health and education cess you pay Rs 26,000.
Examples
| Income | Tax a year (with cess) | Per month |
|---|---|---|
| Salary, Rs 8,00,000 | ₹0 | ₹0 |
| Salary, Rs 12,75,000 | ₹0 | ₹0 |
| Salary, Rs 15,00,000 | ₹97,500 | ₹8,125 |
| Salary, Rs 25,00,000 | ₹3,19,800 | ₹26,650 |
These examples assume a resident individual with no other income or deductions.
What is not included
- The old regime, which depends on deductions such as 80C and HRA.
- Capital gains and other income taxed at special rates.
- Surcharge on income above Rs 50 lakh. The India Income Tax Calculator adds it, with marginal relief.
- Advance tax interest and employer-specific items.
A note on FY 2026-27
The rebate and the slabs above were set in the Union Budget 2025 and are in the Income Tax Department's tax-rate information. The Union Budget 2026-27 summary does not list any change to the personal slabs, and the new Income-tax Act 2025 applies from 1 April 2026. Before you file, confirm the figures on the Income Tax Department's website.
Also useful
If you invoice customers, the GST Calculator adds or removes GST at 0, 3, 5, 18 or 40 percent, and the Invoice Requirements by Country checklist lists the fields of a GST invoice.
Sources
Checked on 21 October 2026. This is general information, not tax advice. Please verify with the Income Tax Department or a chartered accountant.