Is ₹12,75,000 Income Tax-Free in India?
Is ₹12,75,000 Income Tax-Free in India?
Income Tax Explained for FY 2024–25 | AY 2025–26
Many salaried individuals and professionals earning around ₹12.75 lakhs annually are curious to know:
“Is ₹12,75,000 income tax-free in India?”
“Can I legally avoid paying any tax at this income level?”
Let’s break this down under both the old tax regime and the new tax regime so you can make an informed choice.
✅ Understanding Your Tax Liability on ₹12,75,000 Income
First, it's important to know that ₹12.75 lakh is NOT automatically tax-free. However, with smart tax planning, you can significantly reduce or even eliminate your tax liability, especially under the old tax regime.
Now let’s analyze the tax impact under both regimes.
🆕 Under the New Tax Regime (Default)
🔹 Key Points:
• Lower tax rates
• No major deductions allowed (like 80C, 80D, HRA, home loan interest)
• Only ₹50,000 standard deduction is available
• Rebate under Section 87A is applicable only if taxable income ≤ ₹7 lakh
🔹 Tax Calculation:
Income: ₹12,75,000
Standard Deduction: ₹50,000
Taxable Income: ₹12,25,000
Tax Payable:
| Slab Range (₹) | Tax Rate | Tax Amount (₹) |
| 0 – 3L | Nil | 0 |
| 3L – 6L | 5% | ₹15,000 |
| 6L – 9L | 10% | ₹30,000 |
| 9L – 12L | 15% | ₹45,000 |
| 12L – 12.25L | 20% | ₹50,000 |
Total = ₹95,000 + 4% cess = ₹98,800
✅ Tax is NOT zero under the new regime for ₹ 12.75 L income.
🧾 Under the Old Tax Regime
The old regime allows several deductions and exemptions that can bring down your taxable income. Here's how to possibly bring the tax to zero or near-zero:
🔹 Let’s assume the following deductions:
| Deduction Type | Amount (₹) |
| Section 80C (PPF, LIC, ELSS, PF, etc.) | ₹1,50,000 |
| Section 80D (Health Insurance) | ₹25,000 |
| HRA Exemption | ₹1,00,000 |
| Standard Deduction | ₹50,000 |
| Section 24(b) – Home Loan Interest | ₹2,00,000 |
| NPS (80CCD(1B)) | ₹50,000 |
| Total Deductions | ₹5,75,000 |
Taxable Income = ₹12,75,000 – ₹5,75,000 = ₹7,00,000
🔹 Tax Payable (Old Regime Slabs):
• ₹2.5L – ₹5L @ 5% = ₹12,500
• ₹5L – ₹7L @ 20% = ₹40,000
Total Tax = ₹52,500 + 4% cess = ₹54,600
✅ Not tax-free, but much lower than under the new regime.
❓ Can It Be Fully Tax-Free?
To make ₹ 12.75 L income fully tax-free, you must reduce taxable income to ₹5 lakh or below to claim the Section 87A rebate (up to ₹12,500).
This would require ₹ 7.75 L in deductions, which may be possible only if:
• You claim all available 80C, 80D, HRA, NPS, and
• Have a home loan and an education loan, or
• Run a business and claim expenses
So realistically, you can reduce tax significantly, but paying zero tax at ₹ 12.75 L requires extraordinary planning.
✅ Final Words
₹12,75,000 annual income is not tax-free by default, but you can reduce your liability using the old tax regime's deductions.
Unless your net taxable income drops to ₹5L or less, you will not be eligible for a 100% rebate under Section 87A.
