Know How an Income of Rs 12.75 Lakh Becomes Tax-Free Under the New Tax Regime

Business Desk, New Delhi: Finance Minister Nirmala Sitharaman has delivered significant relief to the middle class in the budget. She has effectively made an annual income of up to Rs 12 lakh tax-free. When including the standard deduction of Rs 75,000, a total income of up to Rs 12.75 lakh will now be tax-free.

Many taxpayers are confused because under the new tax regime, an annual income of Rs 12 lakh still falls within the 10% tax bracket. Let's clarify how this income becomes tax-free.

<div class="related-article-inline">Also Read<a href="/minor-pan-card-application-simplified-here-is-all-you-need-to-know-2025-377010.html" class="related-link">Minor PAN Card Application Simplified: Here is All You Need to Know 2025</a></div>
<h2 id="new-tax-regime-rates">New Tax Regime Rates</h2>
Under the current new tax regime, no tax is charged on income from 0 to 4 lakh rupees. Income between 4-8 lakh rupees is taxed at 5%, and income between 8-12 lakh rupees faces a 10% tax. The highest tax rate of 30% applies to annual income exceeding 24 lakh rupees.

<div class="related-article-inline">Also Read<a href="/itr-filing-fy-24-25-new-capital-gains-tax-rates-chart-as-revised-by-income-tax-377002.html" class="related-link">ITR Filing FY 24-25: New Capital Gains Tax Rates Chart as revised by Income Tax</a></div>
<h2 id="how-rs-1275-lakh-becomes-tax-free">How Rs 12.75 Lakh Becomes Tax-Free</h2>
The key lies in Section 87A of the Income Tax, which provides a tax rebate. This rebate is Rs 12,500 in the old tax regime and Rs 60,000 in the new tax regime. Simply put, if your tax liability under the new regime is less than Rs 60,000, you don't need to pay any tax.

Here's how it works: Income of 0-4 lakhs is already tax-free. For income between 4-8 lakhs, you're charged 5%, creating a tax liability of Rs 20,000. For the next segment between 8-12 lakhs, you're charged 10%, adding another Rs 40,000 to your tax bill.

This creates a total tax liability of Rs 60,000 on an annual income of Rs 12 lakh, which is fully covered by the government's rebate. Add the standard deduction of Rs 75,000, and an annual income up to Rs 12.75 lakh effectively becomes tax-free.
<h2 id="how-to-claim-the-tax-rebate">How to Claim the Tax Rebate</h2>
To claim the tax rebate under section 87A, you must file your Income Tax Return (ITR). Once your ITR is processed and approved, the rebate amount will be credited directly to your account.

Know How an Income of Rs 12.75 Lakh Becomes Tax-Free Under the New Tax Regime

Business Desk, New Delhi: Finance Minister Nirmala Sitharaman has delivered significant relief to the middle class in the budget. She has effectively made an annual income of up to Rs 12 lakh tax-free. When including the standard deduction of Rs 75,000, a total income of up to Rs 12.75 lakh will now be tax-free.

Many taxpayers are confused because under the new tax regime, an annual income of Rs 12 lakh still falls within the 10% tax bracket. Let's clarify how this income becomes tax-free.

[related id="377010"]

Finance Minister Nirmala Sitharaman has delivered significant relief to the middle class in the budget. She has effectively made an annual income of up to Rs 12 lakh tax-free.

Know How an Income of Rs 12.75 Lakh Becomes Tax-Free Under the New Tax Regime

ITAT Holds Resale Price Method as Most Appropriate for Benchmarking Import of Finished Goods Without Value Addition

In a significant ruling, the ITAT quashed an income tax assessment after holding that the order attained legal existence only upon being digitally signed.

ITAT Holds Assessment Order Is Legally Complete Only After Digital Signature; Time-Barred Order Quashed

HC Denies Anticipatory Bail to Material Supplier in Alleged Nal-Jal Yojana Fraud Over Missing GST Bills and Invoices

ITAT Rules No TDS on Commission Paid to Overseas Agent for Procuring Export Orders 

ITAT Deletes Penalty under Section 270A for Vague Show Cause Notice Lacking Specific Charge

Income Tax Dept Removes ‘Other Exempt Income’ Option from ITR Forms, Revises Schedule EI for AY 2026-27

Ethereum is no longer just a tech buzzword; it’s a practical subject for tomorrow’s finance professionals

Ethereum Fundamentals for Finance Students through Understanding Blockchain Beyond Bitcoin

From November 1, 2025, several important updates announced by government authorities will come into effect.

Major Financial Changes Effective from November 1, Every Indian Should Aware Of

Mumbai is the financial capital of India, Chartered Accountancy. As we proceed into 2025, this has been one of the most active and progressive sectors.

Top 20 CA Firms in Mumbai for Articleship

The demand for electric vehicles (EV) is continuing to rise and with that comes the need for charging infrastructure.

Know How to Setup EV Charging Stations: Step by Step Guide

This Independence Day, get more than just funding while applying for Bajaj Finserv Business Loan. Apply now and earn additional rewards on successful disbursal.