The short answer: yes, up to ₹12 lakh taxable income
One of the biggest talking points of the new tax regime is that income up to ₹12 lakh is effectively tax-free. It's true — but there are two numbers worth separating, and understanding both saves a lot of confusion.
₹12 lakh taxable vs ₹12.75 lakh salary
The ₹12 lakh limit applies to your taxable income — that is, income after deductions. Because a salaried person also gets a ₹75,000 standard deduction, their gross salary can be as high as ₹12,75,000 while their taxable income stays at ₹12 lakh. Both are "tax-free", they just measure different things.
| Figure | Tax-free ceiling (new regime) |
|---|---|
| Taxable income | ₹12,00,000 |
| Gross salary (salaried) | ~₹12,75,000 |
Why it's zero and not just low
Up to ₹12 lakh, the slab rates do produce some tax on paper. But the Section 87A rebate cancels it entirely. So it isn't that these incomes are outside the tax net — it's that the rebate reduces the calculated tax to nothing.
What happens just above ₹12 lakh?
You don't fall off a cliff. Thanks to marginal relief, income slightly above ₹12 lakh is taxed only on the excess, so the jump is gentle. At ₹12.75 lakh gross a salaried person still pays nothing; a little beyond that, tax rises smoothly rather than all at once.
Type your salary into the calculator. If you're within the limit you'll see a cheerful "you pay no tax" — and if you're just over, you'll see how gentle the increase really is.
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Frequently asked questions
Is 12 lakh income tax-free in the new regime?
Yes. For FY 2025-26, taxable income up to 12,00,000 attracts zero tax under the new regime because of the Section 87A rebate. For salaried people, a gross salary up to about 12.75 lakh is tax-free after the 75,000 standard deduction.
Is it 12 lakh salary or 12 lakh taxable income?
The 12 lakh limit is on taxable income. With the 75,000 standard deduction, a salaried person's gross salary can be around 12.75 lakh while taxable income stays at 12 lakh.
What if my income is slightly above 12 lakh?
Marginal relief ensures you are taxed only on the amount above 12 lakh, so tax rises gently rather than jumping suddenly.