Standard deduction & 87A rebate explained

Two provisions do most of the heavy lifting in keeping middle-income tax low under the new regime for FY 2025-26: the standard deduction and the Section 87A rebate.

Standard deduction

A flat deduction from salary income that requires no proof or investment. For FY 2025-26 it is:

• ₹75,000 under the new regime.
• ₹50,000 under the old regime.

It simply lowers your taxable income before slabs are applied.

Section 87A rebate

The 87A rebate wipes out tax entirely if your taxable income is below a threshold:

• New regime: taxable income up to ₹12,00,000 pays effectively zero tax.
• Old regime: the rebate applies up to ₹5,00,000 of taxable income.

Combined with the ₹75,000 standard deduction, a salaried person under the new regime can have a gross salary meaningfully above ₹12L and still owe little to no income tax — which is exactly why the new regime is attractive for most people who don't claim large deductions.

Above the threshold

Once taxable income crosses ₹12L (new regime), tax is charged on the slabs in the normal way, plus a 4% health & education cess. See the exact slabs on the methodology page, or compare regimes with the new vs old regime calculator.