How is income up to Rs 12L tax-free under the new regime if the slabs start at Rs 4L?

Published 29 September 2026

Geeta from Pune

I just got a hike and my gross salary is exactly Rs 12.75L.

My HR says I won't pay any tax under the new regime.

But when I look at the tax slabs, 5% tax starts right after Rs 4L.

How does this math actually work? Am I missing some hidden catch?

Mohan Gupta Co-founder Foliyo AI, NISM Series X-A, X-B, XXI-A Certified LinkedIn

The zero tax liability on a Rs 12.75L salary under the new regime is the result of combining the standard deduction, the slab system, and a full government rebate. First, you apply the flat standard deduction of Rs 75,000 directly to your gross salary. This brings your taxable income down to exactly Rs 12L.

Next, you calculate the tax using the slab buckets. The first Rs 4L is taxed at 0%. The next Rs 4L bucket (from Rs 4L to Rs 8L) is taxed at 5%, which comes to Rs 20,000.

The final Rs 4L bucket (from Rs 8L to Rs 12L) is taxed at 10%, adding another Rs 40,000.

Your total calculated tax liability is Rs 60,000. Here is where the magic happens. Under the current rules, if your taxable income does not cross that Rs 12L mark, the government provides a full rebate on the entire Rs 60,000. The tax is completely waived off, leaving your net tax payable at zero.

Disclaimer: All information shared above are strictly for educational and informational purposes only. It should not be construed as financial or investment advice.

Ask Mohan

Get your question answered by our advisor.

More from Mohan Gupta

Kamalika from Mumbai

Grinding 70 hours a week to hit a Rs 2Cr FIRE target by age 40. Am I making a mistake?

I am 32 and completely obsessed with reaching a Rs 2Cr portfolio to achieve early retirement. I work extremely long hours, skip vacations, and barely see my friends or family. I fe…

Sriram from Pune

Investing Rs 15k a month in Flexi-Cap funds for a Europe trip in 3yr. Good strategy?

I am planning a major international vacation 3yr down the line. I need about Rs 6L for this and started a monthly SIP of Rs 15k in a Flexi-Cap Mutual Fund. I am expecting a 10% to…

Monish from Mumbai

Aggressively investing for a Rs 1Cr corpus but ignoring health insurance. Is an emergency fund enough?

I am 28 and investing heavily in equity mutual funds to hit Rs 1Cr in the next 10yr. I have a small emergency fund of about Rs 1L and I live with my parents. I haven't bought a fam…

Anirudh from Ranchi

Should I stretch my budget for a premium ready-to-move flat to motivate myself to earn more?

I found a great ready-to-move flat for Rs 1Cr, but the EMI would take up about 50% of my in-hand salary. I have seen podcasts where people say stretching for a house is good becaus…

Ramachandran from Gurugram

How does down payment size change the math between under-construction and ready-to-move homes?

I have saved up a large corpus and can make a 50% down payment on a house. I am debating between an Rs 80L under-construction flat and a Rs 1Cr ready-to-move flat. Most advice assu…