How much income is tax-free in India for AY 2026-27?
Under the new tax regime for AY 2026-27 (the default), income up to ₹12 lakh is effectively tax-free for resident individuals, thanks to the enhanced Section 87A rebate. For a salaried person, the ₹75,000 standard deduction pushes the zero-tax point to about ₹12.75 lakh. Under the old regime, the basic exemption is ₹2.5 lakh (₹3 lakh for senior citizens, ₹5 lakh for super-seniors), but deductions like 80C and HRA can make a much higher income tax-free.
"How much can I earn without paying any income tax?" is the single most common tax question in India — and for AY 2026-27 the answer changed in a big way. This guide explains exactly how much income is tax-free under both the new and old regimes, how the ₹12 lakh figure works, what the standard deduction adds, and shows real worked examples so you can see where you stand.
1What 'tax-free income' actually means
There are two different ideas people mix up. The first is the basic exemption limit — the income below which no tax is charged at all. The second is the rebate under Section 87A — where tax is calculated but then fully waived up to a certain income. For AY 2026-27, the new regime's headline ₹12 lakh figure comes from the rebate, not the exemption.
2New regime: the ₹12 lakh rebate
The new regime is now the default. Tax is computed on the slabs below, but the Section 87A rebate wipes out the entire tax if your total income is up to ₹12 lakh. So a person with ₹12 lakh income pays zero tax.
For salaried individuals, the ₹75,000 standard deduction is subtracted first — so a salary of about ₹12.75 lakh becomes ₹12 lakh taxable, and still attracts no tax. Above ₹12 lakh, slab rates apply, but a 'marginal relief' rule softens the jump for incomes just over the line.
3Old regime: exemption plus deductions
The old regime keeps a ₹2.5 lakh basic exemption (₹3 lakh for those 60+, ₹5 lakh for those 80+). On its own that is lower — but the old regime lets you stack deductions that the new regime doesn't allow.
By claiming the ₹50,000 standard deduction, 80C (₹1.5 lakh), 80D health insurance, HRA, and home-loan interest, many salaried taxpayers legally bring a ₹10–12 lakh salary down to little or no tax. The catch is you must actually make those investments and payments.
4Worked examples
Under the new regime for AY 2026-27:
- Salaried employee earning ₹12.75 lakh: minus ₹75,000 standard deduction = ₹12 lakh taxable → 87A rebate applies → ₹0 tax.
- Freelancer with ₹12 lakh net income (no standard deduction): income is exactly ₹12 lakh → 87A rebate applies → ₹0 tax.
- Salaried employee earning ₹15 lakh: above the rebate, so tax is payable on the slabs — about ₹97,500 including cess under the new regime.
| Total income | Tax rate |
|---|---|
| Up to ₹4,00,000 | Nil |
| ₹4,00,001 – ₹8,00,000 | 5% |
| ₹8,00,001 – ₹12,00,000 | 10% |
| ₹12,00,001 – ₹16,00,000 | 15% |
| ₹16,00,001 – ₹20,00,000 | 20% |
| ₹20,00,001 – ₹24,00,000 | 25% |
| Above ₹24,00,000 | 30% |
Key takeaways
- New regime (default): income up to ₹12 lakh is fully tax-free via the Section 87A rebate.
- Salaried people get a ₹75,000 standard deduction on top, so zero tax up to ~₹12.75 lakh.
- Old regime basic exemption is ₹2.5 lakh, but 80C/80D/HRA/home-loan deductions can make a much higher income tax-free.
- Above ₹12 lakh, the new regime taxes you on the slabs, with marginal relief just above the threshold.
- Always compute both regimes — the old one can still win if your deductions are large.
Frequently asked questions
Is ₹12 lakh income completely tax-free?
Yes, under the new regime — the Section 87A rebate makes total income up to ₹12 lakh tax-free. A salaried person also gets the ₹75,000 standard deduction, so the salary break-even is about ₹12.75 lakh.
Do I still need to file an ITR if my income is tax-free?
Often yes. Filing is mandatory if your gross income (before deductions) crosses the basic exemption, if TDS was deducted, or if you have foreign assets. Even when not mandatory, filing creates a useful income record for loans and visas.
Is the ₹12 lakh limit available in the old regime too?
No — the ₹12 lakh rebate is specific to the new regime. The old regime's 87A rebate is smaller (tax-free up to ₹5 lakh income), but it allows deductions the new regime doesn't.
What about senior citizens?
Under the old regime, the basic exemption is ₹3 lakh for those aged 60–79 and ₹5 lakh for those 80+. Under the new regime, the ₹12 lakh rebate applies regardless of age.
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General information for AY 2026-27, not professional advice. Laws change with each Finance Act, notification or amendment and depend on your specific facts — verify the current position with a licensed CA or advocate before acting.