Tax slabs and the ₹12 lakh rebate

Part of Income tax. 6 min read. Free lesson with a short video, quiz and practice.

A tax slab is a band of income taxed at one rate. India's slabs work step by step: only the part of your income inside each band is taxed at that band's rate. Moving into a higher slab never makes your whole income taxed at the higher rate.

New regime slabs, tax year 2026-27

A 4% health and education cess is added to the tax. People with income above ₹50 lakh also pay a surcharge (an extra percentage of the tax).

The ₹12 lakh rebate

At exactly ₹12,00,000 of taxable income, slab tax is ₹20,000 + ₹40,000 = ₹60,000. The law gives a rebate of up to ₹60,000 to residents whose taxable income is not more than ₹12 lakh, so their tax becomes zero. For a salaried person, add the ₹75,000 standard deduction: a salary of up to ₹12,75,000 pays no tax.

Just above ₹12 lakh: marginal relief

Without help, earning ₹1 more than ₹12 lakh would suddenly cost ₹60,000. To stop this, marginal relief limits your tax to the amount by which your income crosses ₹12 lakh.

Example: taxable income ₹12,10,000. Normal slab tax = ₹60,000 + 15% of ₹10,000 = ₹61,500. With marginal relief, tax is only ₹10,000 (the amount above ₹12 lakh), plus cess. This relief fades out at roughly ₹12.7 lakh of taxable income.

What the rebate does not cover

The rebate applies to tax on normal income such as salary and interest. It does not cut tax on income taxed at special rates, such as short-term gains on shares (20%) or long-term gains above ₹1.25 lakh (12.5%).

Old regime slabs, for comparison

Below 60: nil up to ₹2,50,000; 5% up to ₹5,00,000; 20% up to ₹10,00,000; 30% above. The basic limit is ₹3,00,000 for ages 60–79 and ₹5,00,000 for 80 and above. The old-regime rebate makes tax zero only up to ₹5,00,000 of taxable income.