Zero Tax up to ₹12.75 Lakh: How India’s New Regime Boosts Take-Home Pay

Millions of salaried Indians earning up to ₹12 lakh annually could end up paying zero income tax under the revised tax regime, with an additional deduction pushing the effective tax-free salary to ₹12.75 lakh.

The relief comes through a combination of a rebate available for incomes up to ₹12 lakh and the ₹75,000 standard deduction available to salaried taxpayers. For an employee earning ₹12.75 lakh a year, the deduction reduces taxable income to ₹12 lakh, making the individual eligible for the full rebate and resulting in nil tax liability.

The calculation is straightforward:

• Annual salary: ₹12,75,000

• Standard deduction: ₹75,000

• Taxable income after deduction: ₹12,00,000

• Rebate available: Up to ₹12 lakh taxable income

• Final tax payable: ₹0

In effect, salaried individuals within this bracket retain their entire annual income after deductions, without paying income tax.

A Large Middle-Class Segment Benefits

The ₹8 lakh–₹13 lakh salary band represents a significant portion of India’s urban salaried workforce, particularly professionals in sectors such as technology, finance, consulting, media and corporate services. For employees earning around ₹1 lakh per month, the tax relief can translate into tens of thousands of rupees in annual savings, increasing monthly disposable income.

For example:

• A salaried professional earning ₹12 lakh annually would pay zero tax after rebate.

• Someone earning ₹12.75 lakh would also pay zero tax due to the ₹75,000 standard deduction.

• Monthly income around ₹1.06 lakh can therefore fall within the zero-tax bracket.

Push Toward The New Tax Regime

The structure strengthens the appeal of India’s new tax regime, which offers lower tax rates and rebates but removes most exemptions available under the old system. Policymakers have been gradually shifting taxpayers toward the simplified structure by increasing rebates, adjusting slabs and expanding deductions such as the standard deduction.

With the latest threshold, a substantial section of India’s salaried middle class could see higher take-home pay without complex tax planning. For urban professionals early in their careers, the revised structure effectively creates what financial planners are calling the “₹12 lakh zero-tax bracket.” For salaried individuals, the additional ₹75,000 deduction pushes the practical limit to ₹12.75 lakh, meaning many mid-level professionals may not pay income tax at all under the new regime.

The change is expected to leave more money in the hands of consumers, potentially boosting spending and savings among India’s middle-income workforce.

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