How to Pay Zero Income Tax on ₹12,75,000 Under the New Tax Regime 2025
The Indian government has revised the income tax structure in the Union Budget 2025, providing significant relief to taxpayers. Under the new tax regime, individuals earning up to ₹12,75,000 annually can effectively bring their tax liability down to zero using deductions and rebates.
New Tax Regime Slabs for FY 2025-26
| Income Range (₹) | Tax Rate |
|---|---|
| 0 – 3,00,000 | 0% |
| 3,00,001 – 7,00,000 | 5% |
| 7,00,001 – 10,00,000 | 10% |
| 10,00,001 – 12,00,000 | 15% |
| 12,00,001 – 15,00,000 | 20% |
| Above 15,00,000 | 30% |
Steps to Reduce Tax to Zero for ₹12,75,000 Income
- Apply Standard Deduction: The standard deduction has been increased to ₹75,000 for salaried individuals.
- Net Taxable Income Calculation:
- Gross Income: ₹12,75,000
- Less: Standard Deduction: ₹75,000
- Net Taxable Income: ₹12,00,000
- Tax Calculation Before Rebate:
- ₹0 – ₹3,00,000: No tax
- ₹3,00,001 – ₹7,00,000 @ 5% = ₹20,000
- ₹7,00,001 – ₹10,00,000 @ 10% = ₹30,000
- ₹10,00,001 – ₹12,00,000 @ 15% = ₹30,000
- Total Tax Before Rebate = ₹80,000
- Rebate Under Section 87A:
- The government has extended the rebate under Section 87A for individuals with taxable income up to ₹12,00,000.
- The rebate amount covers the total tax liability up to ₹80,000.
- After applying the rebate, the final tax liability is ₹0.
Final Tax Payable
Total Tax Before Rebate: ₹80,000
Less: Rebate Under Section 87A: ₹80,000
Final Tax Payable: ₹0
Conclusion
With the increase in the standard deduction and the rebate under Section 87A, taxpayers earning up to ₹12,75,000 annually can completely eliminate their tax liability under the new tax regime. This move aims to benefit middle-class taxpayers and boost disposable income, making the new regime more attractive than the old tax system.
