For the financial year 2025-26 (Assessment Year 2026-27) under the new tax regime, annual income up to Rs 12 lakh is effectively tax-free due to the increased rebate under Section 87A. With a standard deduction of Rs 75,000 for salaried individuals, the total tax-free income can effectively reach up to Rs 12.75 lakh.
The new regime is beneficial as there is zero tax liability for income upto Rs. 12 lakhs for FY 2025-26. Can you pay zero tax on Rs 12 lakhs salary ? Yes , You can pay Zero tax on Rs 12 lakhs salary by claiming deduction and exemption like HRA exemption , 80C deduction , Standard deduction , Housing loan interest etc.
12 LAKH UNDER NEW TAX REGIME.
Yes, under Section 87A, Rs. 5 lakh income is tax-exempt. Additionally, investing in life insurance can provide further tax benefits under Section 80C and 10(10D).
Maximum marginal rate is the highest rate of tax at any income level. This means for those with incomes between Rs 2 crore and Rs 5 crore, 39% will be the highest applicable tax rate, and for those with incomes above Rs 5 crore, it will be 42.74% — the highest tax rate since 1992.
There is no income tax liability if your taxable income does not exceed the basic allowance. The basic tax-free allowance for single taxpayers is €11,784 in 2024 and €12,096 in 2025. For jointly assessed spouses/partners, the basic tax-free allowance doubles to €23,568 and to €24,192 in 2025.
In reality, income tax applies once your earnings exceed the basic exemption limit, and the payable amount depends on whether you opt for the old tax regime with deductions or the new regime with lower slab rates to save tax for salary above 12 lakhs.
Tax-free basic personal amounts (BPA)
For the 2025 tax year, the federal maximum basic personal amount is $16,129 (for taxpayers with a net income of $177,882 or less).
For salaried individuals, the ₹75,000 standard deduction further boosts the effective tax-free limit – if your salary is ₹12.75 lakh, after the standard deduction your taxable income is ₹12 lakh, meaning you also pay zero tax.
In her 2025 Budget speech, Finance Minister Nirmala Sitharaman shared big news. Under the new regime, if you earn up to Rs 12 lakh, you will not have to pay any income tax. Salaried taxpayers get an extra benefit too. The standard deduction, which was Rs 50,000 before, has now gone up to Rs 75,000 for the new regime.
Surcharge and Cess:
Surcharge under the New Regime (for individuals below 60 years): Income over ₹50 lakh but under ₹1 crore: 10% of income tax payable. Income over ₹1 crore but under ₹2 crore: 15% of income tax payable. Income over ₹2 crore but under ₹5 crore: 25% of income tax payable.
According to government reports, while over 7 crore people file tax returns, only a fraction of them actually pay taxes because many fall below the taxable income threshold or use deductions to reduce liability.
2. Annual Gift Exclusion: $19,000 Per Person. In 2026, you're allowed to give someone up to $19,000 per year without having to report it to the IRS. If you're married, you and your spouse can give up to $38,000 to the same person without worrying about gift taxes.