In the new regime, a resident individual with taxable income up to ₹12 lakh pays no income tax for tax year 2026-27, because a rebate of up to ₹60,000 under section 156 cancels it. Just above ₹12 lakh, marginal relief stops the tax from jumping.
How the rebate works
Tax is first worked out on the slab rates. If taxable income is ₹12 lakh or less, the rebate cancels it, up to ₹60,000. The slab tax on exactly ₹12 lakh is ₹60,000, so the whole amount goes.
For someone whose only income is salary, the ₹75,000 standard deduction means a salary of up to ₹12.75 lakh leaves taxable income of ₹12 lakh or less.
The old regime has a much smaller rebate: up to ₹12,500, where taxable income is ₹5 lakh or less.
Marginal relief just above ₹12 lakh
Without relief, earning one rupee more than ₹12 lakh would cost ₹60,000 in tax. Section 156 prevents this: the tax cannot be more than the amount by which income exceeds ₹12 lakh. The relief stops mattering at about ₹12.7 lakh, where the slab tax becomes lower than that excess.
| Taxable income | Tax on slab rates | Tax after rebate or relief | With 4% cess |
|---|---|---|---|
| ₹10,00,000 | ₹40,000 | Nil | Nil |
| ₹12,00,000 | ₹60,000 | Nil | Nil |
| ₹12,10,000 | ₹61,500 | ₹10,000 | ₹10,400 |
| ₹12,50,000 | ₹67,500 | ₹50,000 | ₹52,000 |
| ₹12,70,000 | ₹70,500 | ₹70,000 | ₹72,800 |
| ₹13,00,000 | ₹75,000 | ₹75,000 | ₹78,000 |
Points to watch
- The ₹12 lakh limit is on taxable income, after deductions, not on gross salary.
- The nil-tax figure is for normal income. Income taxed at special rates, such as capital gains, is outside it, as the Budget Speech 2025-26 noted.
- The 4% health and education cess is added to whatever tax remains after the rebate.
- The rebate follows the regime you choose: up to ₹60,000 in the new regime, up to ₹12,500 in the old.
Common questions
What salary gives nil tax in 2026-27?
With salary as the only income, up to ₹12.75 lakh in the new regime. The ₹75,000 standard deduction brings taxable income down to ₹12 lakh.
Is income up to ₹12 lakh exempt?
Not exempt: the tax is calculated and then cancelled by the rebate, so the tax payable is nil.
Does the ₹12 lakh limit apply in the old regime?
No. In the old regime the rebate is up to ₹12,500, for taxable income up to ₹5 lakh.
What happens at ₹12.5 lakh?
Slab tax is ₹67,500, but marginal relief limits it to ₹50,000, the amount above ₹12 lakh. With cess, that is ₹52,000.
Check your own figure with the income tax calculator or the salary calculator. Deciding between regimes? Read new or old tax regime for 2026-27. We file returns under both regimes: see income tax return filing.
Sources: Income-tax Act, 2025, sections 19, 156 and 202; Budget Speech 2025-26, paragraph 156 (the ₹12.75 lakh salary figure); Income Tax Department. Figures in the table are our calculations from the section 202 slab rates.