Short answer
In the new regime, Section 156 (earlier 87A) wipes out tax of up to ₹60,000 when your taxable income is ₹12 lakh or less, so a salary up to ₹12.75 lakh (after the ₹75,000 standard deduction) pays no income tax in FY 2026-27. Just above ₹12 lakh, marginal relief caps your tax at the amount your income exceeds ₹12 lakh. In the old regime the rebate is ₹12,500 for taxable income up to ₹5 lakh.
What Section 156 says
Section 156 has two rebates for resident individuals:
- Old regime, Section 156(1): 100% of the tax or ₹12,500, whichever is less, if total income is ₹5 lakh or less.
- New regime, Section 156(2)(a): 100% of the tax or ₹60,000, whichever is less, if total income is ₹12 lakh or less.
- Marginal relief, Section 156(2)(b): if total income is above ₹12 lakh, and the tax is more than the amount by which income exceeds ₹12 lakh, the excess tax is given back as rebate.
Health and education cess of 4% is charged on whatever tax remains after the rebate, so when the rebate cancels the tax, there is no cess either.
The rebate applies to tax on income taxed at normal slab rates. Tax on income at special rates, such as equity capital gains, is not covered by the new-regime rebate.
Worked examples in the new regime
| Salary | Taxable income | Slab tax | Rebate / relief | Tax + cess |
|---|---|---|---|---|
| ₹12,00,000 | ₹11,25,000 | ₹52,500 | − ₹52,500 | ₹0 |
| ₹12,75,000 | ₹12,00,000 | ₹60,000 | − ₹60,000 | ₹0 |
| ₹13,00,000 | ₹12,25,000 | ₹63,750 | − ₹38,750 | ₹26,000 |
| ₹13,50,000 | ₹12,75,000 | ₹71,250 | — | ₹74,100 |
| ₹14,00,000 | ₹13,25,000 | ₹78,750 | — | ₹81,900 |
At a salary of ₹13 lakh, taxable income is ₹12,25,000 and the slab tax is ₹63,750. Without marginal relief you would pay that in full, but your income is only ₹25,000 above ₹12 lakh, so tax is capped at ₹25,000 plus 4% cess: ₹26,000.
By a salary of ₹13,50,000 the relief has run out: the slab tax of ₹71,250 is now smaller than the ₹75,000 by which income exceeds ₹12 lakh, so you pay the normal slab tax.
The old-regime rebate: ₹12,500 up to ₹5 lakh
| Salary | Taxable income | Tax + cess |
|---|---|---|
| ₹5,50,000 | ₹5,00,000 | ₹0 |
| ₹5,51,000 | ₹5,01,000 | ₹13,208 |
| ₹7,00,000 | ₹6,50,000 | ₹44,200 |
The old regime has no marginal relief. Taxable income of exactly ₹5,00,000 pays nothing, but ₹5,01,000 pays the full slab tax, which is why ₹1,000 more salary above that point can cost over ₹13,000 in tax. Deductions under Section 123 (earlier 80C) and others can bring taxable income back under ₹5 lakh.
Check your own salary
Enter your salary in the old vs new regime calculator; it applies the rebate and marginal relief automatically. See tax at every salary from ₹5 lakh to ₹50 lakh on our salary-wise pages, starting with ₹13 lakh, the marginal-relief case above.
Sources
General information, not tax advice. Please consult a chartered accountant (CA) or tax professional before filing or making financial decisions.