Is income up to ₹12.75 Lakh completely tax-free under the New Tax Regime (AY 2026-27)?

Yes, for resident salaried individuals. The ₹75,000 standard deduction reduces ₹12.75 Lakh gross salary to ₹12 Lakh taxable income, which is 100% eligible for the Section 87A rebate (up to ₹60,000 tax relief), resulting in zero net tax.

How does Section 87A marginal relief work for income slightly above ₹12 Lakh?

Under the Section 87A proviso for the New Regime, if taxable income exceeds ₹12 Lakh by a small margin (e.g. ₹12,10,000), total tax payable before cess is capped at the excess amount over ₹12 Lakh (i.e. ₹10,000), preventing disproportionate tax spikes.

Are there exclusions or limitations to Section 87A rebate?

Yes. Section 87A rebate is available only to resident individuals (not NRIs, HUFs, or firms). Additionally, special rate incomes like Long-Term Capital Gains under Section 112A (above ₹1.25 Lakh) and Short-Term Capital Gains under Section 111A are subject to statutory rebate restrictions.

Which regime should I choose for AY 2026-27?

The New Tax Regime is more tax-efficient for the majority of taxpayers due to lower slab rates and the ₹12.75L zero-tax threshold. The Old Regime is beneficial only if you have large eligible deductions (Section 80C, 80D, HRA, Section 24b interest) exceeding ₹4.5 to ₹5 Lakh.

TAX SALARYInteractive Tool

Income Tax Calculator FY 2025-26 (AY 2026-27)

Compare New vs Old Tax Regime for FY 2025-26 (AY 2026-27). Calculate tax liability with ₹75,000 standard deduction and Section 87A rebate.

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Interactive Inputs

Assessment Year

Total Gross Annual Income / Salary

₹

₹3,00,000₹15 Lakh₹1,00,00,000

Deductions & Exemptions (for Old Regime)Automatic in calculations

Section 80C (EPF, PPF, ELSS, LIC, Home Principal)

₹

₹0₹1.50 Lakh₹1,50,000

Section 80D (Health Insurance Premium for Self & Parents)

₹

₹0₹25 Thousand₹1,00,000

Section 24(b) (Home Loan Interest on Self-Occupied Property)

₹

₹0Zero Rupees₹2,00,000

HRA Exemption / Rent Paid Exemption

₹

₹0Zero Rupees₹5,00,000

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AY 2026-27 Slabs

Recommended: New Tax Regime

₹97,500

New Tax Regime saves you ₹1,05,300 annually compared to Old Regime.

New Regime Tax Outgo₹97,500

Old Regime Tax Outgo₹2,02,800

Standard Deduction₹75,000₹75k (New) vs ₹50k (Old)

Old Regime Deductions Claimed₹2,25,000

Tax Engine VersionAY 2026-27

Effective Tax Rate (New):6.5%

Effective Tax Rate (Old):13.52%

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Tax Slab Breakdown Comparison (AY 2026-27)

New Tax RegimeTotal: ₹97,500

₹0.0L - ₹4.0L:₹0

₹4.0L - ₹8.0L:₹20,000

₹8.0L - ₹12.0L:₹40,000

₹12.0L - ₹16.0L:₹33,750

4% Health & Edu Cess:₹3,750

Old Tax RegimeTotal: ₹2,02,800

₹0.0L - ₹2.5L:₹0

₹2.5L - ₹5.0L:₹12,500

₹5.0L - ₹10.0L:₹1,00,000

Above ₹10.0L:₹82,500

4% Health & Edu Cess:₹7,800

Key Tax Rules & Differences for AY 2026-27 (FY 2025-26)

New Tax Regime (Default)

Standard Deduction: ₹75,000 for salaried employees and pensioners.
7 Slabs: 0-4L (Nil), 4-8L (5%), 8-12L (10%), 12-16L (15%), 16-20L (20%), 20-24L (25%), >24L (30%).
Section 87A Rebate: 100% tax rebate up to ₹12 Lakh taxable income (making gross salary up to ₹12.75 Lakh completely tax-free).
Section 87A Marginal Relief: If taxable income exceeds ₹12 Lakh slightly (e.g. ₹12,10,000), tax before cess is strictly capped at the excess over ₹12 Lakh.
Section 87A Exclusions: Rebate applies to resident individuals only; does not offset special rate taxes on capital gains under Section 112A/111A.

Old Tax Regime (Optional)

Standard Deduction: ₹50,000 for salaried individuals.
Section 80C: Up to ₹1.5 Lakh for EPF, PPF, ELSS, Life Insurance, and Tuition Fees.
Section 80D: Up to ₹25,000 (Self) + ₹50,000 (Senior Citizen Parents) for Medical Insurance.
Section 24(b): Up to ₹2.0 Lakh for home loan interest on self-occupied house.
HRA Exemption: Deductions for actual rent paid under Section 10(13A).
Section 87A: Full rebate up to ₹5 Lakh taxable income only (max rebate ₹12,500).

Practical Scenario

Example: ₹15 Lakh Salary in AY 2026-27 (New vs Old Regime)

A salaried employee earning ₹15,00,000 per year with ₹1.5 Lakh in Section 80C deductions compares both tax regimes.

Input Parameters

Gross Salary:₹15,00,000
Standard Deduction:₹75,000 (New) / ₹50,000 (Old)
Section 80C Deductions:₹1,50,000

Calculated Results

New Regime Tax:₹97,500 (saves ₹1,13,100)
Old Regime Tax:₹2,10,600
Recommended Regime:New Tax Regime (AY 2026-27)

Key Takeaway: Under official AY 2026-27 slabs, the New Tax Regime is overwhelmingly superior for almost all income levels, with salaried income up to ₹12.75 Lakh paying exactly ₹0 tax under Section 87A.

How This Calculation Works (Mathematical Formula)

Tax = Slabs + Surcharge + 4% Health & Education Cess - 87A Rebate

Computed slab-by-slab after standard deduction (₹75,000 New / ₹50,000 Old) and eligible Section 80C, 80D, HRA deductions under the Old Regime.

Frequently Asked Questions

AY 2026-27 New Tax Regime features 7 tax brackets: 0–₹4L (0%), ₹4L–₹8L (5%), ₹8L–₹12L (10%), ₹12L–₹16L (15%), ₹16L–₹20L (20%), ₹20L–₹24L (25%), and above ₹24L (30%). A standard deduction of ₹75,000 applies to salaried individuals.

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Helpful Guides & Explanations

Income Tax Planning

New vs Old Tax Regime: Which One Saves More Tax for AY 2026-27?

The New Tax Regime is the default tax regime in India featuring 7 concessional tax slabs, ₹75,000 standard deduction, and zero tax on salaried income up to ₹12.75 Lakh.

Read →

Income Tax Planning

Tax on ₹10 Lakh Salary: Complete New vs Old Regime Calculation

For a salaried employee earning ₹10 Lakh CTC in AY 2026-27, New Regime tax is ₹0 due to the enhanced ₹12 Lakh Section 87A rebate.

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Income Tax Planning

Tax on ₹15 Lakh Salary: New vs Old Regime Detailed Breakdown

On a ₹15 Lakh salary, New Regime tax is just ₹97,500 after ₹75k standard deduction (AY 2026-27). Old Regime requires over ₹4.5 Lakh in deductions to break even.

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Disclosure: Ankiva One provides free financial calculators and guides. When you apply for products through partner links on our website, we may receive compensation at no extra cost to you. This does not influence our objective calculations.