Zero Tax on ₹12 Lakh Income & The ₹75,000 Standard Deduction#
The New Tax Regime (now the default regime) raised the standard deduction and widened the Section 156 rebate ceiling. Together, these two changes mean a salaried individual earning a gross income of ₹12 Lakh pays zero income tax — without needing to restructure their salary or invest in anything.
The Two Pillars of Zero Tax#
1. The ₹75,000 Standard Deduction#
Previously ₹50,000, the standard deduction for salaried employees and pensioners under the New Tax Regime is now ₹75,000.
- The Benefit: This is a flat, unconditional deduction. No rent receipts, travel tickets, or medical bills required — it's simply subtracted from gross salary.
2. The Section 156 Rebate#
The government rebates tax in full for resident individuals whose net taxable income does not exceed a set ceiling. Under the New Tax Regime, that ceiling is ₹12 Lakh (raised from ₹7 Lakh in Budget 2025), with the rebate capped at ₹60,000.
The Math: ₹12 Lakh Gross Salary to Zero Tax#
- Gross Salary: ₹12,00,000
- Less: Standard Deduction: (₹75,000)
- Net Taxable Income: ₹11,25,000
- Tax on ₹11,25,000 (5% on ₹4L–₹8L, 10% on ₹8L–₹11.25L): ₹52,500
- Less: Section 156 Rebate (taxable income is within the ₹12 lakh ceiling, so the full computed tax is rebated): (₹52,500)
- Final Tax Payable: ₹0
No NPS contribution, home loan, or other deduction is needed to reach this — the standard deduction plus the rebate alone get a ₹12 Lakh salary to zero tax under the New Regime.
If Your Salary Is Above ₹12 Lakh#
Above ₹12 Lakh taxable income the 156 rebate stops applying, but a few deductions remain available under the New Regime and can still reduce tax:
- Employer's NPS Contribution (Section 80CCD(2)): deductible up to 14% of Basic + DA — one of the very few deductions that survives under the New Regime.
- Note: unlike the Old Regime, a loss from home loan interest on a let-out property cannot be set off against salary income under the New Regime — that set-off (up to ₹2 lakh) is available only if you opt for the Old Regime.
Conclusion#
The New Tax Regime is designed to put more disposable income in your hands without requiring investment-linked tax planning. If your gross salary is at or below ₹12 Lakh, the standard deduction and Section 156 rebate already bring your tax to zero under the New Regime — no restructuring needed.