Tax on ₹12 Lakh Salary FY 2026-27: New vs Old Regime
Last updated: · Tax Year 2026-27 (1 April 2026 to 31 March 2027) · Rates as per Finance Act 2026
Chacha ka short answer: if your salary is ₹12 lakh a year, you pay ₹0 income tax under the new regime in FY 2026-27. A salary of up to ₹12.75 lakh is tax-free (₹0 at exactly ₹12.75 lakh). Under the old regime the same ₹12 lakh costs about ₹1,63,800 to ₹59,800, depending on deductions. For most people at this salary, the new regime wins.
Want to check your own numbers? Use the Income Tax Calculator FY 2026-27.
Quick comparison: ₹12 lakh salary
| New regime | Old regime, no deductions | Old regime, ₹4.25 lakh deductions | |
|---|---|---|---|
| Gross salary | ₹12,00,000 | ₹12,00,000 | ₹12,00,000 |
| Standard deduction | −₹75,000 | −₹50,000 | −₹50,000 |
| Other deductions | — | — | −₹4,25,000 |
| Taxable income | ₹11,25,000 | ₹11,50,000 | ₹7,25,000 |
| Tax on slabs | ₹52,500 | ₹1,57,500 | ₹57,500 |
| Rebate | −₹52,500 | — | — |
| Cess 4% | ₹0 | ₹6,300 | ₹2,300 |
| Total tax | ₹0 | ₹1,63,800 | ₹59,800 |
Resident individual below 60, salary income only. ₹4.25 lakh of deductions = 80C ₹1.5 lakh + 80D ₹25,000 + NPS 80CCD(1B) ₹50,000 + home-loan interest ₹2 lakh.
New regime calculation, step by step
- Gross salary: ₹12,00,000
- Less the standard deduction of ₹75,000. Taxable income is ₹11,25,000.
- Tax on slabs: the first ₹4,00,000 is nil; ₹4,00,001 to ₹8,00,000 at 5% is ₹20,000; ₹8,00,001 to ₹11,25,000 at 10% is ₹32,500. Slab tax is ₹52,500.
- Section 87A rebate: taxable income is under ₹12 lakh, so the full ₹52,500 is rebated. The Income-tax Act, 2025 keeps this rebate; the section number has changed, and this page keeps the familiar 87A name.
- Tax after rebate is ₹0, cess is ₹0, total tax is ₹0.
Why ₹12.75 lakh is the real tax-free limit
The rebate covers taxable income up to ₹12,00,000 (a rebate of up to ₹60,000). With the ₹75,000 standard deduction, that is a ₹12,75,000 salary. At exactly ₹12.75 lakh, slab tax on ₹12 lakh is ₹60,000, the rebate is ₹60,000, and tax is ₹0.
Salary a bit over ₹12.75 lakh: marginal relief
Take a ₹13,00,000 salary. Taxable income is ₹12,25,000, and slab tax would be ₹63,750. Marginal relief caps the tax at the amount over ₹12 lakh, which is ₹25,000. Add 4% cess and you pay ₹26,000.
Old regime calculation, step by step
Old regime slabs below 60: nil up to ₹2.5 lakh, 5% for ₹2.5–5 lakh, 20% for ₹5–10 lakh, 30% above ₹10 lakh. Standard deduction ₹50,000.
Case A: no deductions
Taxable income is ₹12,00,000 − ₹50,000 = ₹11,50,000. Tax is ₹12,500 (5% of ₹2.5 lakh) + ₹1,00,000 (20% of ₹5 lakh) + ₹45,000 (30% of ₹1.5 lakh) = ₹1,57,500. Cess is ₹6,300. Total ₹1,63,800.
Case B: 80C ₹1.5 lakh + 80D ₹25,000
Taxable income is ₹9,75,000. Tax is ₹12,500 + 20% of ₹4,75,000 (₹95,000) = ₹1,07,500. Cess is ₹4,300. Total ₹1,11,800.
Case C: Case B + NPS ₹50,000 + home-loan interest ₹2 lakh
Taxable income is ₹7,25,000. Tax is ₹12,500 + 20% of ₹2,25,000 (₹45,000) = ₹57,500. Cess is ₹2,300. Total ₹59,800.
Can the old regime ever win at ₹12 lakh?
Practically, no. The new regime tax is ₹0, so the old regime only ties if taxable income drops to ₹5 lakh or less. That needs about ₹6.5 lakh of deductions on top of the ₹50,000 standard deduction (for example 80C, 80D, NPS, home-loan interest and a large HRA exemption). Very few people at this salary get there.
Chacha's tip: don't stop your PPF, ELSS or health insurance just because they no longer cut this tax bill. They are still useful for the goal. PPF calculator · SIP calculator
What if your HRA is large?
HRA exemption works only in the old regime. From Tax Year 2026-27, Bengaluru, Hyderabad, Pune and Ahmedabad get the 50%-of-salary limit, like Mumbai, Delhi, Kolkata and Chennai. Even then, at ₹12 lakh you would need a very large HRA plus the other deductions to beat ₹0. Check the exempt amount in the HRA calculator.
Important things to remember
- The ₹0 result is for resident individuals with income taxed at slab rates. The rebate does not cover special-rate income such as capital gains on shares or mutual funds.
- Your employer deducts TDS from the regime you declare. If too much TDS is cut, the refund comes when you file the return.
- Salaried people with no business income can pick the regime again each year at filing time.
Tax at nearby salaries (new regime, FY 2026-27)
| Gross salary | Taxable, after ₹75,000 | Total tax |
|---|---|---|
| ₹10,00,000 | ₹9,25,000 | ₹0 |
| ₹12,00,000 | ₹11,25,000 | ₹0 |
| ₹12,75,000 | ₹12,00,000 | ₹0 |
| ₹13,00,000 | ₹12,25,000 | ₹26,000 (marginal relief) |
| ₹15,00,000 | ₹14,25,000 | ₹97,500 |
Frequently asked questions
Is a ₹12 lakh salary tax-free in FY 2026-27?
Yes, under the new regime. After the ₹75,000 standard deduction, taxable income is ₹11.25 lakh. Slab tax is ₹52,500, and the section 87A rebate wipes it out, so you pay ₹0.
How much tax on ₹12 lakh salary in the old regime?
About ₹1,63,800 with no deductions, ₹1,11,800 with 80C and 80D, and ₹59,800 with 80C, 80D, NPS and ₹2 lakh home-loan interest. All of those include 4% cess.
Is ₹12 lakh of taxable income also tax-free?
Yes. Taxable income of exactly ₹12 lakh gives ₹60,000 of slab tax, and the ₹60,000 section 87A rebate makes it nil. For a salaried person that is a gross salary of ₹12.75 lakh.
What happens at ₹13 lakh salary?
Marginal relief applies. Taxable income is ₹12.25 lakh, so tax before cess is capped at ₹25,000, the amount above ₹12 lakh. With cess that is ₹26,000.
Did Budget 2026 change the ₹12 lakh rebate?
No. Budget 2026 kept the slabs, the ₹12 lakh rebate limit and the ₹75,000 standard deduction. What is new is the Income-tax Act, 2025: the year is now called Tax Year 2026-27. This page keeps the familiar section 87A name for the rebate.
Does the rebate apply to capital gains?
No. Special-rate income such as equity capital gains does not get the rebate, even when the rest of your income is under ₹12 lakh.
Should I still invest in 80C if I am on the new regime?
It will not save tax. PPF, ELSS, EPF and health insurance are still useful for the goal they were bought for. Invest for the goal. The tax break was only ever a side effect, and only in the old regime.
Your salary isn't exactly ₹12 lakh?
Chacha will do the hisaab.
Open the Income Tax CalculatorDisclaimer: Estimates for planning only, not tax advice. Verify on incometax.gov.in or with a CA.
How we verified this
- CBDT memorandum to the Finance Bill 2026: no change in rates for tax year 2026-27.
- Threshold limits: rebate of ₹12 lakh / ₹60,000.
- CNBC-TV18: standard deduction of ₹75,000 unchanged in Budget 2026.