Where ₹12.75 Lakh Comes From
- Salary ₹12,75,000 minus the ₹75,000 standard deduction = taxable income ₹12,00,000.
- Slab tax on ₹12 lakh: 5% of ₹4 lakh (₹20,000) + 10% of ₹4 lakh (₹40,000) = ₹60,000.
- The rebate (Section 156 of the Income-tax Act, 2025 — earlier Section 87A) is up to ₹60,000 when taxable income is ₹12 lakh or less. Tax becomes zero.
For people without salary income (no standard deduction), the tax-free limit is ₹12 lakh of taxable income.
What Happens Just Above the Limit
Without help, earning ₹1 more than ₹12 lakh of taxable income would suddenly create a bill of over ₹60,000. Marginal relief stops this: your tax cannot be more than the amount by which your taxable income exceeds ₹12 lakh.
| Salary | Taxable income | Tax payable (incl. cess) |
|---|---|---|
| ₹12,75,000 | ₹12,00,000 | ₹0 |
| ₹12,80,000 | ₹12,05,000 | ₹5,200 |
| ₹13,00,000 | ₹12,25,000 | ₹26,000 |
| ₹13,25,000 | ₹12,50,000 | ₹52,000 |
| ₹13,50,000 | ₹12,75,000 | ₹74,100 |
| ₹13,75,000 | ₹13,00,000 | ₹78,000 |
| ₹14,00,000 | ₹13,25,000 | ₹81,900 |
Between about ₹12.75 lakh and ₹13.5 lakh of salary, almost every extra rupee earned goes in tax. Beyond that, normal slab rates take over.
Practical Tips
- If your salary is just above ₹12.75 lakh, ask your employer about employer NPS contributions (80CCD(2)) — they are deductible in the new regime and can bring taxable income back to ₹12 lakh.
- The rebate does not cover income taxed at special rates, such as short-term gains on shares (20%) or long-term gains above ₹1.25 lakh (12.5%).
- If your employer has already deducted TDS but your income is within the limit, you will get it back as a refund when you file your return.
Frequently Asked Questions
Is salary up to ₹12.75 lakh tax-free?
Yes, under the new regime for FY 2025-26 and FY 2026-27, as long as you have no special-rate income such as capital gains. ₹75,000 standard deduction plus the ₹12 lakh rebate limit gives ₹12.75 lakh.
How much tax on ₹13 lakh salary?
₹26,000 under the new regime, after marginal relief.
Does the ₹12 lakh rebate apply to capital gains?
No. The rebate is not available against tax on special-rate income such as equity capital gains.
Is the rebate available in the old regime?
Only up to ₹5 lakh of taxable income, with a maximum rebate of ₹12,500 and no marginal relief.
This guide explains general rules for educational purposes and reflects the law as reviewed in October 2026. It is not tax or legal advice. For your own situation, please consult a Chartered Accountant or the official Income Tax Department and GST portals.