Moment guide · FY 2026-27
I am checking whether my ₹12 lakh income is tax-free
Is ₹12 lakh income really tax-free in the new regime?
In the new regime, a resident individual with total income up to ₹12,00,000 (after the ₹75,000 standard deduction) can have tax reduced to zero through the section 87A rebate of up to ₹60,000. The catch is that special-rate income — section 111A STCG and section 115BBH VDA — is outside the rebate for AY 2026-27 and is taxed at its own rate even below ₹12 lakh. Marginal relief applies just above ₹12 lakh, so the result is not a hard cliff.
Your legitimate options
Every route the statute actually gives you — with its condition, cap and deadline.
| Route | Condition | Cap / deadline |
|---|---|---|
| Rebate up to ₹60,000 | New regime, resident individual, total income up to ₹12,00,000 after the ₹75,000 standard deduction | Rebate u/s 87A limited to the tax computed, so tax is nil up to ₹12L |
| Just above ₹12 lakh | Marginal relief softens the edge — tax payable is the excess over ₹12L rather than a full cliff | Marginal relief applies to ordinary-rate income |
| Special-rate income excluded | 111A STCG (20%) and 115BBH VDA gains (30%) are NOT covered by the 87A rebate for AY 2026-27 | Special-rate income is taxed at its own rate even if total income is below ₹12L |
The #1 trap
The viral '₹12 lakh salary = zero tax' headline quietly excludes special-rate income. For AY 2026-27, section 87A does not offset section 111A STCG or section 115BBH VDA gains, so someone with ₹11 lakh salary plus ₹1 lakh of listed-equity STCG pays 20% on the STCG even though total income is ₹12 lakh. And ₹12.75 lakh gross salary minus ₹75,000 standard deduction equals ₹12 lakh total income — that is the exact zero-tax point.
The decision path
Follow it top to bottom — the first condition that matches is your answer.
Worked example
Ananya, consultant earning ₹12.75 lakh gross salary
Ananya's gross salary is ₹12,75,000. Under the new regime she claims the ₹75,000 standard deduction under section 16(ia), giving her a total income of ₹12,75,000 minus ₹75,000, which is ₹12,00,000. Because her total income does not exceed ₹12,00,000, the section 87A rebate of up to ₹60,000 wipes out her entire new-regime tax, so she pays nil. If her salary were ₹13,00,000, her total income after the deduction would be ₹12,25,000, and the tax at new-regime rates before rebate would be about ₹25,000, which exceeds the rebate ceiling, so she would pay the slab tax with marginal relief softening the edge. Now add a wrinkle: Ananya also sold listed shares held for eight months and made a short-term capital gain of ₹80,000. Under section 111A that gain is taxed at 20%, which is ₹16,000, and the section 87A rebate does NOT offset it for AY 2026-27, because the Finance Act 2025 proviso keeps special-rate income outside the rebate. Even though her total income is now ₹12,80,000, the STCG portion is taxed separately at its own rate. The same logic applies to virtual digital asset gains under section 115BBH, which are taxed at 30% without any rebate offset. The viral claim that '₹12 lakh income is always zero tax' therefore breaks the moment any special-rate income is present. Ananya reports the STCG in the capital gains schedule of her ITR and pays the ₹16,000, while her ordinary income remains at nil. A quick call with us dials in the final figure. Ananya also checks whether her interest income of ₹18,000 from fixed deposits changes the rebate arithmetic: with total income of ₹12,18,000, the tax before rebate rises above the ₹60,000 rebate ceiling, so she would pay the excess at slab rates, making the 'zero tax' claim false the moment non-salary income crosses ₹12 lakh. Marginal relief applies for income slightly above the threshold, so her colleague with total income of ₹12,30,000 pays only the excess over ₹12 lakh, not the full slab tax. The rebate is available only to resident individuals, so a non-resident earning ₹11 lakh of Indian interest gets no 87A relief at all. She also notes that long-term capital gains under section 112A above the ₹1.25 lakh exemption are outside the rebate, and the same exclusion applies to deemed dividend and other special-rate income. A quick call with us dials in the final figure.
Claims influencers make about this moment
- Partly true“You pay zero tax up to ₹12 lakh salary”
- Partly true“Old tax regime is dead after 2023”
Questions people actually ask
Sections: 87A, 115BAC, 111A, 115BBH · Last verified 2026-08-11 · Reviewed by Harun Raaj & Associates, Chartered Accountants. Every figure cites the Income-tax Act, 1961 (with ITA 2025 mapping via our section index).