Is Income up to Rs 12.75 Lakh Tax Free? How the Rebate Works
Yes, for a salaried resident under the new tax regime. Rs 12.75 lakh is the Rs 12,00,000 rebate limit plus the Rs 75,000 standard deduction: a salary up to that amount leaves taxable income at or below Rs 12 lakh, where the rebate makes tax nil. The rule is unchanged for FY 2026-27.
The Rs 12.75 lakh figure comes from adding the Rs 75,000 standard deduction available to salaried individuals under the new tax regime to the Rs 12,00,000 taxable income limit for the Section 87A rebate. A salaried person with a gross salary of about Rs 12.75 lakh can bring their taxable income down to Rs 12,00,000 after the standard deduction, at which point the rebate brings the computed tax to nil.
The maths behind the number
| Step | Amount |
|---|---|
| Gross salary | Rs 12,75,000 |
| Less: standard deduction (new regime, salaried) | - Rs 75,000 |
| Taxable income | Rs 12,00,000 |
| Section 87A rebate limit | Applies fully, since taxable income is at Rs 12,00,000 |
| Tax after rebate | Rs 0 (before cess) |
This is why you may see Rs 12.75 lakh quoted as a "tax-free" salary figure for a salaried individual, even though the rebate itself is actually defined around a Rs 12,00,000 taxable income limit, not a Rs 12,75,000 gross salary figure. The extra Rs 75,000 is simply the standard deduction that gets you from gross salary down to taxable income.
Check exactly where your own salary lands with the income tax calculator, which applies the standard deduction, the rebate and cess automatically.
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Why the exact figure depends on your situation
The Rs 12.75 lakh shortcut works cleanly for a salaried individual with no other income and no adjustments beyond the standard deduction. It changes if you have other income sources, such as interest or rental income, since these are added to your taxable income but do not get the same Rs 75,000 salaried standard deduction. It also does not apply if you are filing under the old tax regime, which has a different rebate threshold and a different set of deductions altogether.
This is general information about how the rebate works, not personalised tax advice. Confirm your own exact taxable income and rebate eligibility with a tax professional or the official calculator on incometax.gov.in before relying on this for a real financial decision.
What happens just above the Rs 12 lakh taxable income mark
The rebate stops once taxable income crosses Rs 12,00,000, but marginal relief applies under the new regime: your tax cannot be more than the amount by which your taxable income exceeds Rs 12,00,000. The Budget 2025 speech confirmed that this relief applies to income marginally above Rs 12 lakh.
| Gross salary | Taxable income | Slab tax | Tax payable (before 4% cess) |
|---|---|---|---|
| Rs 12,75,000 | Rs 12,00,000 | Rs 60,000 | Rs 0 (full rebate) |
| Rs 12,85,000 | Rs 12,10,000 | Rs 61,500 | Rs 10,000 (marginal relief) |
| Rs 13,25,000 | Rs 12,50,000 | Rs 67,500 | Rs 50,000 (marginal relief) |
| Rs 13,50,000 | Rs 12,75,000 | Rs 71,250 | Rs 71,250 (relief no longer helps) |
The relief stops helping at a taxable income of about Rs 12,70,500 (a salary of about Rs 13,45,500 after the standard deduction), where the normal slab tax becomes the smaller figure. Worked on the new regime slabs for a resident below 60 with only salary income.
Does this mean nobody with a salary above Rs 12.75 lakh pays tax?
No. Once your taxable income moves meaningfully above Rs 12,00,000, the rebate no longer applies and you pay tax according to the full slab structure, calculated from the nil band upward, not just on the amount above Rs 12,00,000. See the new tax regime slabs for the full table and worked examples at higher income levels.
A quick way to estimate your own number
- Add up your gross salary and any other taxable income for the year.
- If you are salaried and filing under the new regime, subtract the Rs 75,000 standard deduction from your salary income specifically.
- Add back any other income, such as interest or rental income, which does not get this deduction.
- Compare the result to the Rs 12,00,000 rebate threshold.
- If you are close to the line either way, use the income tax calculator for an exact figure rather than a rough estimate.
Why this figure spread so widely
Rs 12.75 lakh became a popular shorthand because it is a clean, easy-to-remember number for the most common case: a salaried employee with no other significant income, filing under the new regime. It travelled quickly through news coverage and social media precisely because it sounds like a simple threshold, even though it is really the result of combining two separate provisions, the standard deduction and the rebate, that apply for slightly different reasons.
Checking whether it applies to your own salary
Before assuming this figure applies to you, confirm three things: that you are salaried and eligible for the Rs 75,000 standard deduction, that you have no other significant taxable income that would push your total above Rs 12,00,000 after the deduction, and that you are filing under the new tax regime rather than the old one. If all three hold, a gross salary at or a little below Rs 12.75 lakh should indeed land you at nil tax; if any of them do not hold, work out your specific number rather than relying on the shortcut alone.
Common mistakes
- Assuming the Rs 12.75 lakh figure applies to gross income including interest, rent or other non-salary sources.
- Applying this shortcut to the old tax regime, which has a different rebate threshold entirely.
- Thinking the rebate phases out gradually right at Rs 12 lakh without checking the marginal relief calculation.
- Confusing "tax-free up to Rs 12.75 lakh" with a change to the underlying slab rates, when it is really the rebate and the standard deduction together doing the work.
Tools for this
Frequently asked questions
Why is Rs 12.75 lakh mentioned as tax free, when the rebate limit is Rs 12 lakh?
Because a salaried individual gets a Rs 75,000 standard deduction under the new regime, which brings a Rs 12,75,000 gross salary down to Rs 12,00,000 taxable income, exactly at the rebate limit.
Does this apply if I have income from sources other than salary?
Only the salary portion gets the Rs 75,000 standard deduction. Other income like interest or rent is added on top and does not benefit from this same deduction, which can push your taxable income above Rs 12 lakh.
Does this rebate apply under the old tax regime too?
No, the old tax regime has a different Section 87A rebate threshold and its own set of deductions. This Rs 12.75 lakh shortcut is specific to the new tax regime.
What if my taxable income is Rs 12,50,000, just above the limit?
The rebate stops above Rs 12,00,000, but marginal relief caps your tax at the amount above Rs 12 lakh. At Rs 12,50,000 taxable income, slab tax is Rs 67,500, but you pay Rs 50,000 plus 4% cess. The relief stops helping at about Rs 12,70,500 of taxable income.
Is this the same as saying tax rates changed for everyone?
No, the underlying slab rates are unchanged. The rebate simply cancels out the computed tax entirely for taxable income up to Rs 12 lakh, which is why income up to that point ends up paying nothing.
Does the Rs 12.75 lakh limit still apply in FY 2026-27?
Yes. The Budget 2026-27 Memorandum states that no change is proposed in the new regime rates for tax year 2026-27, and Budget 2026 did not change the rebate or the Rs 75,000 standard deduction. From 1 April 2026 these sit in the Income-tax Act, 2025, so section numbers differ from the old 87A and 115BAC.
Sources
- Budget 2025-26 speech (nil tax up to Rs 12 lakh, Rs 12.75 lakh for salaried, marginal relief) (checked 2026-09)
- Income Tax Department: new regime slabs and rebate limits (checked 2026-09)
- Budget 2026-27: Memorandum explaining the Finance Bill, 2026 (rates for tax year 2026-27) (checked 2026-09)
Rules and limits change. Always check the latest official notification or portal before you submit a form.