₹12 lakh, zero tax — how the new regime rebate actually works

For FY 2025-26 (the return due 31 July 2026), the Section 87A rebate under the new tax regime rose to ₹60,000, up from ₹25,000 the year before. That single number is why income up to ₹12,00,000 now results in zero tax — not because that income isn't taxed, but because the rebate cancels out the tax calculated on it.

Here's how it works, with numbers. Say your taxable income is ₹12,00,000. Run it through the new regime's slabs and you get a tax of roughly ₹60,000 before cess. Since your income doesn't exceed ₹12,00,000, Section 87A lets you claim a rebate up to ₹60,000 — which exactly cancels that tax. Net payable: zero. If you're salaried, add the ₹75,000 standard deduction on top, and a gross salary of about ₹12,75,000 can still land you at zero tax.

Who this affects: salaried individuals with gross income up to roughly ₹12,75,000 who've opted for (or are considering) the new regime. Tax is still calculated on your full income; the rebate is what wipes it out afterward, and only up to the ₹60,000 cap.

What to do: know exactly where the edge is. The rebate applies only if your taxable income doesn't exceed ₹12,00,000 — cross that line by even a little, and you don't just pay tax on the excess, you lose the rebate on the whole amount too (marginal relief softens this, but it's still worth avoiding by design). Also note: the rebate doesn't apply to income taxed at special rates, like capital gains, so if you have those alongside salary, don't assume your whole income is covered.