Tax & salary

Standard deduction ₹75,000 and rebate 87A, without the slide deck

Two numbers get taped to office monitors every Budget week. Under the new regime for FY 2026–27, salaried people get a ₹75,000 standard deduction. Section 87A can rebate tax for resident individuals when taxable income sits at or under ₹12 lakh, capped at ₹60,000. Together they mint the slogan “effectively tax-free until about ₹12.75 lakh gross.” Directionally useful. Not a statute title. Not a tattoo. Confirm the live chart on the Income Tax Department site if you are reading this after a Budget. This page is not CA advice.

I model both numbers on the salary calculator (starts from CTC, invents a PF/HRA sketch so two regimes share a yardstick) and on the income tax calculator (starts from taxable income you already computed). Use the salary page when you have an offer letter. Use the tax page when you already know the number after deductions. Do not paste CTC into the tax page and then blame 87A.

What each lever actually does

Standard deduction under section 16 is a salary-income haircut. New regime: ₹75,000. Old regime: ₹50,000 plus the classic stack (80C, HRA exemption, and the rest). It is not a rebate. It shrinks taxable income before slabs run. If your “₹12.75 lakh” is CTC, not salary income, the haircut is sitting on the wrong head. Employer PF inside CTC never was yours to spend; the salary sketch subtracts a PF line so you do not treat brochure rupees as taxable rupees. Read CTC vs in-hand vs Form 16 before you celebrate a Slack screenshot.

Section 87A is a rebate after slab tax. On the new-regime side of both calculators: if taxable income is greater than ₹12 lakh, rebate is zero. If it is at or under ₹12 lakh, rebate is the lesser of tax-before-rebate and ₹60,000. That cap is not a coincidence. New-regime slabs for FY 2026–27: nil to ₹4 lakh, then 5% on the next ₹4 lakh (₹20,000), 10% on the next ₹4 lakh (₹40,000). Tax on exactly ₹12 lakh taxable is ₹60,000. The cap wipes that chart. One rupee of taxable income over the window and the rebate story ends. Health and education cess at 4% applies to tax after rebate, so a wiped rebate is also a wiped cess in the simplified model.

Old-regime 87A is a different, smaller story. I do not pretend the new-regime slogan works on the old column. Senior-citizen extra exemption is mostly an old-regime feature in the model I ship; new-regime slabs are uniform for individuals. Surcharge, capital gains, and two employers are out of scope on both pages. For the regime decision rule, see old vs new regime.

Worked example: the slogan number

Salary income ₹12,75,000. New-regime standard deduction ₹75,000. Taxable = ₹12,00,000. Slab tax = ₹20,000 + ₹40,000 = ₹60,000. 87A rebate = ₹60,000. Tax after rebate = ₹0. Cess = ₹0. That is the entire “₹12.75 lakh tax-free for salaried” poster, assuming no other income. Type 1200000 on the income tax calculator and watch 87A eat the slab. If you only have a CTC of ₹12,75,000, do not assume this result. PF, professional tax, and whatever else payroll subtracts will move taxable off this round number. Run the salary calculator on the annexure’s salary-for-tax line, not the brochure total.

Worked example: one rupee over the window

Taxable income ₹12,00,001. Same slabs, plus 15% on the extra rupee — tax before rebate ≈ ₹60,000.15. Taxable is over ₹12 lakh, so 87A is zero. Cess 4% ≈ ₹2,400. Total ≈ ₹62,400. You did not “enter a new slab” in any meaningful lifestyle sense. You fell off a rebate cliff. That is why people re-check Form 16 line items in March. If you are sitting on that cliff with arrears, a second Form 16, or capital gains, a browser box is the wrong instrument. Use it to see the cliff. Use a CA spreadsheet to stand on it.

Worked example: other income that the salary page never sees

Salary taxable after the ₹75,000 standard deduction: ₹11,80,000. FD interest, a small freelance line, or a savings-account credit: ₹40,000. Total taxable = ₹12,20,000. 87A is gone. Slab tax on ₹12.2 lakh = ₹60,000 + 15% of ₹20,000 = ₹63,000. Cess 4% = ₹2,520. Total = ₹65,520. The salary calculator never added that ₹40,000. The income tax calculator will, if you type ₹12,20,000. People lose the slogan because “other income” is small and the cliff is binary. If your AIS shows interest you forgot, you are not in the ₹12 lakh window even if the payslip looks clean.

For a number already past the window: ₹13 lakh taxable, new regime. Tax before rebate = ₹75,000. No 87A. Cess ₹3,000. Total ₹78,000. Type 1300000 on the tax page. That is a normal mid-salary result, not a bug in the rebate.

What this note adds that the calculators do not

The salary page compares regimes on one CTC. The tax page compares slabs on one taxable number. This note is the two-lever story: standard deduction shrinks the base; 87A can zero the bill only while the base stays under ₹12 lakh; the ₹60,000 cap is the tax on that threshold, not a gift sitting on top. Other income, two employers, and a CTC that is not salary income are how the slogan dies in March. I cannot see your Form 16. I can tell you not to treat ₹12.75 lakh as a law. Confirm on incometax.gov.in. Not CA advice. File on time.