You may have heard that income up to ₹12 lakh is now tax-free. That is true under the new tax regime, but not because the first ₹12 lakh is exempt. The slab tax is still worked out; a rebate then cancels it. Knowing that explains what happens just above ₹12 lakh, where many salaries fall.
How the rebate works
Under the new regime for 2026-27, if your taxable income is ₹12 lakh or less, a rebate of up to ₹60,000 wipes out your tax. The slab tax on exactly ₹12 lakh is ₹60,000 (5% of the ₹4 lakh between ₹4 and ₹8 lakh, plus 10% of the ₹4 lakh between ₹8 and ₹12 lakh), so the rebate covers it all.
If you are salaried, the ₹75,000 standard deduction comes off first. So a salary of ₹12.75 lakh leaves exactly ₹12 lakh taxable, and pays nothing.
Just above ₹12 lakh: marginal relief
Without help, earning one rupee more than ₹12 lakh would cost you about ₹60,000 in tax, because the rebate disappears. Marginal relief prevents that: your tax cannot be more than the income you have above ₹12 lakh.
Take a ₹13 lakh salary. Taxable income is ₹12.25 lakh, and the slab tax is ₹63,750. But you only have ₹25,000 above ₹12 lakh, so the tax is capped at ₹25,000. With 4% cess, you pay ₹26,000, not ₹66,300.
- Without marginal relief
- Tax you pay
Salary
See the numbers
| Salary | Without marginal relief | Tax you pay |
|---|---|---|
| ₹11.5 lakh | ₹0 | ₹0 |
| ₹11.55 lakh | ₹0 | ₹0 |
| ₹11.6 lakh | ₹0 | ₹0 |
| ₹11.65 lakh | ₹0 | ₹0 |
| ₹11.7 lakh | ₹0 | ₹0 |
| ₹11.75 lakh | ₹0 | ₹0 |
| ₹11.8 lakh | ₹0 | ₹0 |
| ₹11.85 lakh | ₹0 | ₹0 |
| ₹11.9 lakh | ₹0 | ₹0 |
| ₹11.95 lakh | ₹0 | ₹0 |
| ₹12 lakh | ₹0 | ₹0 |
| ₹12.05 lakh | ₹0 | ₹0 |
| ₹12.1 lakh | ₹0 | ₹0 |
| ₹12.15 lakh | ₹0 | ₹0 |
| ₹12.2 lakh | ₹0 | ₹0 |
| ₹12.25 lakh | ₹0 | ₹0 |
| ₹12.3 lakh | ₹0 | ₹0 |
| ₹12.35 lakh | ₹0 | ₹0 |
| ₹12.4 lakh | ₹0 | ₹0 |
| ₹12.45 lakh | ₹0 | ₹0 |
| ₹12.5 lakh | ₹0 | ₹0 |
| ₹12.55 lakh | ₹0 | ₹0 |
| ₹12.6 lakh | ₹0 | ₹0 |
| ₹12.65 lakh | ₹0 | ₹0 |
| ₹12.7 lakh | ₹0 | ₹0 |
| ₹12.75 lakh | ₹0 | ₹0 |
| ₹12.8 lakh | ₹63,180 | ₹5,200 |
| ₹12.85 lakh | ₹63,960 | ₹10,400 |
| ₹12.9 lakh | ₹64,740 | ₹15,600 |
| ₹12.95 lakh | ₹65,520 | ₹20,800 |
| ₹13 lakh | ₹66,300 | ₹26,000 |
| ₹13.05 lakh | ₹67,080 | ₹31,200 |
| ₹13.1 lakh | ₹67,860 | ₹36,400 |
| ₹13.15 lakh | ₹68,640 | ₹41,600 |
| ₹13.2 lakh | ₹69,420 | ₹46,800 |
| ₹13.25 lakh | ₹70,200 | ₹52,000 |
| ₹13.3 lakh | ₹70,980 | ₹57,200 |
| ₹13.35 lakh | ₹71,760 | ₹62,400 |
| ₹13.4 lakh | ₹72,540 | ₹67,600 |
| ₹13.45 lakh | ₹73,320 | ₹72,800 |
| ₹13.5 lakh | ₹74,100 | ₹74,100 |
| ₹13.55 lakh | ₹74,880 | ₹74,880 |
| ₹13.6 lakh | ₹75,660 | ₹75,660 |
| ₹13.65 lakh | ₹76,440 | ₹76,440 |
| ₹13.7 lakh | ₹77,220 | ₹77,220 |
| ₹13.75 lakh | ₹78,000 | ₹78,000 |
| ₹13.8 lakh | ₹78,780 | ₹78,780 |
| ₹13.85 lakh | ₹79,560 | ₹79,560 |
| ₹13.9 lakh | ₹80,340 | ₹80,340 |
| ₹13.95 lakh | ₹81,120 | ₹81,120 |
| ₹14 lakh | ₹81,900 | ₹81,900 |
New regime, 2026-27, with 4% cess. Without marginal relief, tax would jump from nil to over ₹60,000 just past ₹12.75 lakh.
The relief fades as income rises. It stops mattering at ₹12,70,590 of taxable income, where the slab tax (₹70,588.50) is about the same as the income above ₹12 lakh. Above that, you simply pay the slab tax.
| Salary | Taxable | Slab tax | Rebate or relief | You pay |
|---|---|---|---|---|
| ₹12.75 lakh | ₹12 lakh | ₹60,000 | −₹60,000 | Nil |
| ₹13 lakh | ₹12.25 lakh | ₹63,750 | −₹38,750 | ₹26,000 |
| ₹13.25 lakh | ₹12.5 lakh | ₹67,500 | −₹17,500 | ₹52,000 |
| ₹13.5 lakh | ₹12.75 lakh | ₹71,250 | None | ₹74,100 |
| ₹14 lakh | ₹13.25 lakh | ₹78,750 | None | ₹81,900 |
New regime. You pay the slab tax less the rebate or relief, plus 4% cess.
Try it
Tax on a salary near ₹12 lakh
- Taxable income
- ₹12.25 lakh
- Slab tax
- ₹63,750
- Tax you pay
- ₹26,000
Marginal relief takes ₹38,750 off the slab tax. That is 2% of your salary.
What this does not cover
- The old regime has its own, smaller rebate: no tax up to ₹5 lakh of taxable income, and no marginal relief above it.
- Income taxed at special rates, such as capital gains on shares and mutual funds, is treated separately.
- The rules here are for residents below 60.
To see your own figure, enter your salary in the tax regime calculator. It shows the rebate or marginal relief line by line, under both regimes.
For education only. Not investment, tax or insurance advice. Examples use the figures stated in the guide; check your own before you act.