Many people are confused about India’s new tax regime. They ask: “If there is no tax up to ₹12 lakh, why do we still see slabs like 0–4 lakh, 4–8 lakh, and 8–12 lakh?”
Let’s break this down in simple, everyday language.
Slabs vs. Rebate
- Tax Slabs: These are the basic structure of income tax. They decide how much tax is charged on different portions of your income.
- Rebate (Section 87A): This is a relief given to taxpayers. Under the new regime, if your taxable income (after deductions) is up to ₹12 lakh, you get a rebate that cancels out your tax liability.
Think of slabs as the rules of the game and rebate as a special discount. The rules are always there, but the discount makes tax zero up to ₹12 lakh. Let’s take two examples to understand this easily.
Current Slabs Under New Regime
- 0–4 lakh → 0%
- 4–8 lakh → 5%
- 8–12 lakh → 10%
- 12–16 lakh → 15%
- 16–20 lakh → 20%
- 20–24 lakh → 25%
- Above 24 lakh → 30%
Example 1: Salary of ₹12,75,000
- Gross Salary = ₹12,75,000
- Standard Deduction = ₹75,000
- Taxable Income = ₹12,00,000
Slab Calculation:
- 0–4 lakh → Nil
- 4–8 lakh → 5% of ₹4,00,000 = ₹20,000
- 8–12 lakh → 10% of ₹4,00,000 = ₹40,000
- Total Tax = ₹60,000
Rebate (Sec 87A): Since taxable income is up to ₹12 lakh, rebate cancels this ₹60,000.
- Final Tax Payable = ₹0
- No tax liability.
Example 2: Salary of ₹15,75,000
- Gross Salary = ₹15,75,000
- Standard Deduction = ₹75,000
- Taxable Income = ₹15,00,000
Slab Calculation:
- 0–4 lakh → Nil
- 4–8 lakh → 5% of ₹4,00,000 = ₹20,000
- 8–12 lakh → 10% of ₹4,00,000 = ₹40,000
- 12–15 lakh → 15% of ₹3,00,000 = ₹45,000
- Total Tax = ₹1,05,000
Rebate (Sec 87A): Not available (income > ₹12 lakh).
- Add 4% cess = ₹4,200
- Final Tax Payable = ₹1,09,200
- Tax liability exists.
So, Slabs Below ₹12 Lakh Matter
So, the slabs starting from 0–4, 4–8, and 8–12 lakh are not useless—they are the backbone of the system. The rebate simply neutralizes them for incomes up to ₹12 lakh. Up to ₹12 lakh, rebate cancels tax. Beyond that, slabs apply fully.
- They define the structure of taxation.
- They ensure fairness and smooth progression once income crosses ₹12 lakh.
- Without slabs, someone earning ₹12.1 lakh would suddenly face a huge tax burden. Slabs prevent this shock by applying tax gradually.
Disclaimer: This article is for general informational purposes only and is based on the income tax rules applicable under the New Regime for FY 2025–26 (AY 2026–27). The examples provided (₹12,75,000 and ₹15,75,000 annual income) are simplified illustrations to help readers understand how tax slabs and rebates work.
Tax laws are subject to change, and actual liability may vary depending on individual circumstances, deductions, exemptions, and government notifications. Readers are advised to consult a qualified tax professional or financial advisor before making any decisions related to their personal tax planning.
