How to Pay ZERO Tax on ₹12 Lakh Income ?

Here’s How the New ₹60,000 Tax Rebate Can Reduce Your ITR to ZERO!

If you're someone earning up to ₹12 lakh a year and planning to file your ITR soon—you’ll want to read this.

There’s been a lot of buzz lately about a major update to the income tax rebate under Section 87A, and the best part? It’s great news for middle-income earners like you.

Let’s break it all down and see how this new rebate can potentially bring your tax payable to ZERO—yes, seriously!

🧾 What's Changed in Section 87A?

Starting from the financial year 2025-26, the government has increased the rebate limit under Section 87A from ₹25,000 to a whopping ₹60,000.

So, who benefits?

✅ Resident individuals earning between:

• ₹7 lakh to ₹12 lakh under the new tax regime, or
• Up to ₹5 lakh under the old tax regime

This move is aimed at easing the tax burden on India’s growing middle class—especially for salaried millennials and professionals.

🧮 How the Tax Rebate Works

The beauty of Section 87A is that it reduces your tax liability before the 4% health and education cess is even applied.

So, if your total tax (before cess) is within ₹60,000, the rebate can cancel it entirely—leaving you with no tax to pay at all.

Let’s walk through a quick example:

📊 Example Under New Tax Regime

Income Component	Amount (₹)
Gross Total Income	₹7,00,000
Deductions (80C, etc.)	Not applicable
Taxable Income	₹7,00,000
Tax (@5% on ₹4 lakh: ₹3L–₹7L slab)	₹20,000
Less: Rebate under Section 87A	₹20,000
Tax Payable	₹0

➡️ In this case, even though you technically owe ₹20,000 in taxes, you can claim a rebate of the same amount under Section 87A. That means your final tax liability is zero.

🧩 How to Claim the Rebate in Your ITR

If your income falls within the eligible bracket, here’s what you need to do:

1. Calculate your gross total income
2. Deduct eligible tax-saving investments or expenses (under old regime)
3. Arrive at your net taxable income
4. Mention both your gross and net income clearly in your ITR
5. Claim the rebate under Section 87A before the cess is applied

👉 If the final tax amount (before cess) is ₹60,000 or less—you’re good to go.

📣 Why This Matters for You

Whether you're a salaried employee, a freelancer, or running a small business, this update can be a big win. It:

• Encourages filing under the new tax regime
• Offers better relief for those just above the ₹7 lakh mark
• Helps more people legally reduce their tax bill

If you earn ₹12 lakh or below, make sure to assess your income and tax structure carefully—because you could end up paying no tax at all.

Final Thoughts

Tax season doesn’t always have to be stressful. With updates like the new ₹60,000 rebate, the government is trying to make taxation simpler and fairer for middle-income earners.

So, take advantage of the benefits available, file your ITR early, and always stay informed.

And hey—if this helped you understand your taxes better, share it with someone who might benefit too.

FAQs –

Q1. Who is eligible for the ₹60,000 rebate under Section 87A?
A: Resident individuals with total income up to ₹12 lakh under the new tax regime or ₹5 lakh under the old regime can claim this rebate starting FY 2025–26.

Q2. Is this rebate available under both old and new tax regimes?
A: Yes, but the ₹60,000 rebate applies only to the new regime. Under the old regime, the rebate is limited to ₹12,500 for income up to ₹5 lakh.

Q3. Will the rebate apply before or after cess?
A: The rebate under Section 87A is applied before calculating the 4% health and education cess.

Q4. What if my total tax is more than ₹60,000?
A: If your pre-cess tax exceeds ₹60,000, you can claim only ₹60,000 as rebate—the rest is payable.

Q5. Do I need to submit proof to claim Section 87A rebate?
A: No separate proof is needed. You simply have to calculate and claim it while filing your ITR—it’s an automatic benefit if you qualify.