Income Tax on ₹10 Lakh Salary: Key Numbers
- New regime tax: ₹0 (zero). The Section 87A rebate wipes out the entire ₹32,500 tax liability. No deductions needed.
- Old regime tax: ₹1,06,600 with no deductions, dropping to ₹70,200 with basic 80C and 80D investments.
- The new regime wins at every deduction level for a ₹10 lakh salary. There is no breakeven point because the new regime already gives you zero tax.
- The tax-free ceiling under the new regime is ₹12,75,000 salary (₹12,00,000 taxable income after ₹75,000 standard deduction). At ₹10 lakh, you are well within this limit.
- Filing your ITR is still mandatory even though tax is zero.
A ₹10 lakh annual salary is one of the most common income levels for mid-career professionals in India: IT engineers, bank officers, government employees, and small business managers. The most important thing you need to know: under the new tax regime, your income tax is zero.
This is not a simplification. After the standard deduction and Section 87A rebate, a ₹10 lakh salaried employee owes exactly ₹0 in income tax for FY 2026-27 (AY 2027-28). This guide walks through the exact calculation, compares it against the old regime, and explains why the new regime is the clear winner at this salary level.
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New Tax Regime: Zero Tax
The new tax regime is the default for all taxpayers from FY 2024-25 onward. You do not need to file Form 10-IEA to use it.
Step 1: Standard Deduction
| Particulars | Amount |
|---|---|
| Gross Annual Salary | ₹10,00,000 |
| Less: Standard Deduction | (₹75,000) |
| Taxable Income | ₹9,25,000 |
Step 2: Apply New Regime Slabs (FY 2026-27)
| Income Slab | Rate | Tax |
|---|---|---|
| Up to ₹4,00,000 | Nil | ₹0 |
| ₹4,00,001 to ₹8,00,000 | 5% | ₹20,000 |
| ₹8,00,001 to ₹9,25,000 | 10% | ₹12,500 |
| Total Income Tax | ₹32,500 |
Step 3: Section 87A Rebate
| Component | Amount |
|---|---|
| Income Tax Before Rebate | ₹32,500 |
| Section 87A Rebate (taxable income ₹9.25L < ₹12L limit) | (₹32,500) |
| Tax After Rebate | ₹0 |
| Health & Education Cess @ 4% | ₹0 |
| Total Tax Liability | ₹0 |
No surcharge applies because taxable income is below ₹50 lakh.
New Regime Summary
| Component | Amount |
|---|---|
| Income Tax | ₹32,500 |
| Section 87A Rebate | (₹32,500) |
| Net Tax | ₹0 |
| Cess | ₹0 |
| Total Tax | ₹0 |
| Effective Tax Rate | 0% |
| Monthly Tax | ₹0 |
| Take-Home (Approx.) | ₹10,00,000 |
How the Section 87A Rebate Makes ₹10 Lakh Tax-Free
The Section 87A rebate is a direct tax credit, not a deduction. It reduces your tax liability to zero if your taxable income stays within the threshold.
Under the new regime for FY 2026-27:
- Threshold: Taxable income up to ₹12,00,000
- Maximum rebate: ₹60,000
- Your taxable income: ₹9,25,000 (well within the limit)
- Your tax before rebate: ₹32,500 (fully covered by the ₹60,000 cap)
This means any salaried employee earning up to ₹12,75,000 per year (₹12 lakh + ₹75,000 standard deduction) pays zero income tax under the new regime. At ₹10 lakh, you have a ₹2,75,000 buffer before you start owing any tax.
| Salary | Taxable Income | 87A Rebate? | Tax |
|---|---|---|---|
| ₹8,00,000 | ₹7,25,000 | Yes | ₹0 |
| ₹10,00,000 | ₹9,25,000 | Yes | ₹0 |
| ₹12,00,000 | ₹11,25,000 | Yes | ₹0 |
| ₹12,75,000 | ₹12,00,000 | Yes (exact limit) | ₹0 |
| ₹13,00,000 | ₹12,25,000 | No | ₹41,600 |
Once salary exceeds ₹12,75,000, the rebate disappears entirely. There is no partial rebate.
Old Tax Regime: Three Scenarios
The old regime has higher slab rates (5%, 20%, 30%) but allows deductions under Sections 80C, 80D, HRA, and others. You must file Form 10-IEA before the due date to opt into the old regime.
At ₹10 lakh, the old regime always costs more than the new regime's zero tax, except in one extreme scenario.
Scenario A: No Deductions (Standard Deduction Only)
| Particulars | Amount |
|---|---|
| Gross Salary | ₹10,00,000 |
| Standard Deduction (Old Regime) | (₹50,000) |
| Taxable Income | ₹9,50,000 |
| Income Slab | Rate | Tax |
|---|---|---|
| Up to ₹2,50,000 | Nil | ₹0 |
| ₹2,50,001 to ₹5,00,000 | 5% | ₹12,500 |
| ₹5,00,001 to ₹9,50,000 | 20% | ₹90,000 |
| Total Tax | ₹1,02,500 | |
| Cess @ 4% | ₹4,100 | |
| Total | ₹1,06,600 |
New regime saves ₹1,06,600. Without deductions, you pay over one lakh in tax that you could avoid entirely.
Scenario B: Basic Investments (80C + 80D)
Most salaried employees make at least some tax-saving investments:
| Deduction | Section | Amount |
|---|---|---|
| Standard Deduction | 16(ia) | ₹50,000 |
| PPF/ELSS/EPF/LIC | 80C | ₹1,50,000 |
| Health Insurance (Self) | 80D | ₹25,000 |
| Total Deductions | ₹2,25,000 |
Taxable Income: ₹7,75,000
| Income Slab | Rate | Tax |
|---|---|---|
| Up to ₹2,50,000 | Nil | ₹0 |
| ₹2,50,001 to ₹5,00,000 | 5% | ₹12,500 |
| ₹5,00,001 to ₹7,75,000 | 20% | ₹55,000 |
| Total Tax | ₹67,500 | |
| Cess @ 4% | ₹2,700 | |
| Total | ₹70,200 |
New regime saves ₹70,200. Even with ₹1.5 lakh in 80C and ₹25,000 in health insurance, the old regime costs ₹70,200 more than the new regime's zero.
Scenario C: HRA + NPS + 80D Parents
This scenario applies to employees living in rented accommodation in a metro city with aggressive tax planning:
| Deduction | Section | Amount |
|---|---|---|
| Standard Deduction | 16(ia) | ₹50,000 |
| PPF/ELSS/EPF/LIC | 80C | ₹1,50,000 |
| Health Insurance (Self + Parents) | 80D | ₹50,000 |
| NPS Employee Contribution | 80CCD(1B) | ₹50,000 |
| HRA Exemption (₹12,000/month rent, metro) | 10(13A) | ₹1,04,000 |
| Professional Tax | 16(iii) | ₹2,500 |
| Total Deductions | ₹4,06,500 |
Taxable Income: ₹5,93,500
| Income Slab | Rate | Tax |
|---|---|---|
| Up to ₹2,50,000 | Nil | ₹0 |
| ₹2,50,001 to ₹5,00,000 | 5% | ₹12,500 |
| ₹5,00,001 to ₹5,93,500 | 20% | ₹18,700 |
| Total Tax | ₹31,200 | |
| Cess @ 4% | ₹1,248 | |
| Total | ₹32,448 |
New regime still saves ₹32,448. Even with HRA, NPS, and parents' health insurance, you still pay ₹32,448 in the old regime versus zero in the new regime.
Can the Old Regime Ever Match Zero?
Yes, but only in one extreme scenario: when total deductions push taxable income below ₹5,00,000, triggering the old regime's own 87A rebate of ₹12,500.
| Deduction | Section | Amount |
|---|---|---|
| Standard Deduction | 16(ia) | ₹50,000 |
| PPF/ELSS/EPF/LIC | 80C | ₹1,50,000 |
| Health Insurance (Self + Parents) | 80D | ₹50,000 |
| NPS Employee Contribution | 80CCD(1B) | ₹50,000 |
| HRA Exemption (₹12,000/month rent, metro) | 10(13A) | ₹1,04,000 |
| Home Loan Interest | 24(b) | ₹2,00,000 |
| Professional Tax | 16(iii) | ₹2,500 |
| Total Deductions | ₹6,06,500 |
Taxable Income: ₹3,93,500
Tax: ₹7,175 (5% on ₹1,43,500). Old regime 87A rebate applies (taxable income < ₹5 lakh): tax becomes zero.
But this requires simultaneously paying rent and a home loan exceeding ₹2 lakh in annual interest. This applies only if you rent in one city and own property in another, or your property is under construction. For most employees at ₹10 lakh, this scenario does not apply.
The practical conclusion: stay in the new regime.
Comparison at a Glance
| Factor | New Regime | Old Regime (Scenario B) |
|---|---|---|
| Standard Deduction | ₹75,000 | ₹50,000 |
| 80C Deduction | Not available | Up to ₹1,50,000 |
| 80D Deduction | Not available | Up to ₹25,000 (₹50,000 with parents) |
| HRA Exemption | Not available | Available |
| Home Loan Interest (24b) | Not available | Up to ₹2,00,000 |
| NPS 80CCD(1B) | Not available | Up to ₹50,000 |
| Total Tax | ₹0 | ₹70,200 |
| Effective Rate | 0% | 7.02% |
| Form 10-IEA Required | No (default) | Yes |
Monthly Take-Home (New Regime)
For a ₹10 lakh salaried employee under the new regime:
| Component | Monthly | Annual |
|---|---|---|
| Gross Salary | ₹83,333 | ₹10,00,000 |
| Income Tax (TDS) | ₹0 | ₹0 |
| Net Take-Home (Approx.) | ₹83,333 | ₹10,00,000 |
Actual take-home will be lower after EPF employee contribution (12% of basic), professional tax (state-dependent, ₹200/month max), and other statutory deductions. The ₹10 lakh figure reflects only income tax.
For a typical salary structure with basic at 40% (₹4,00,000), EPF contribution at 12% of basic would be ₹48,000 per year (₹4,000/month), reducing monthly in-hand to approximately ₹79,333.
Common Mistakes to Avoid
1. Opting for the old regime at ₹10 lakh. There is no scenario where the old regime saves you money at this salary level (unless you have a home loan, which is rare at ₹10 lakh income). The new regime gives zero tax automatically.
2. Not filing your ITR because tax is zero. ITR filing is mandatory when gross income exceeds ₹2,50,000. A zero tax liability does not exempt you from filing. Non-filing triggers notices and can block future loan approvals and visa applications.
3. Assuming the rebate means no TDS. Your employer may still deduct TDS during the year. You claim the refund when you file your ITR, or submit Form 12BAA to your employer to request lower TDS based on the 87A rebate eligibility.
4. Confusing the ₹12 lakh rebate with ₹12 lakh salary. The 87A rebate applies to taxable income up to ₹12 lakh, not gross salary. After the ₹75,000 standard deduction, the salary threshold is ₹12,75,000. At ₹10 lakh salary, you are safely within this limit.
5. Forgetting employer NPS contribution (80CCD(2)). This is the one major deduction available in both regimes. If your employer contributes to NPS, claim it under 80CCD(2) regardless of your regime choice. It does not affect the 87A calculation under the new regime.
Where Tax Garden Helps
Even though your tax at ₹10 lakh is zero, filing your ITR correctly still matters. Errors in income reporting, missing Form 16 details, or incorrect regime selection can trigger processing notices.
Tax Garden's CAs help you:
- Confirm 87A eligibility and verify your salary structure qualifies for zero tax
- File your ITR accurately with correct income heads and regime selection
- Claim TDS refund if your employer deducted tax during the year
- Handle income tax notices if your return is selected for processing
- Plan for salary growth by calculating at what income level you will start paying tax
Looking for expert help with income tax on 10 lakh salary, 10 lakh salary tax calculation, zero tax 10 lakh, new vs old regime 10 lakh, income tax 10 lakh FY 2026-27? The team at Tax Garden, based in Kondapur, Hyderabad, helps Indian SMEs stay compliant. End-to-end filings, notices, and deadline tracking, all in one place.
Income Tax on ₹10 Lakh Salary: Frequently Asked Questions
Is ₹10 lakh salary tax-free in India?
Yes, under the new tax regime for FY 2026-27. After the ₹75,000 standard deduction, taxable income is ₹9,25,000. The Section 87A rebate of up to ₹60,000 wipes out the entire ₹32,500 tax. Net tax payable is zero.
Do I need to file ITR if my salary is ₹10 lakh and tax is zero?
Yes. Filing an ITR is mandatory if your gross income exceeds ₹2,50,000, even if your tax liability is zero after the 87A rebate. Non-filing can trigger notices under Section 139.
How much tax do I pay on ₹10 lakh salary under the old regime?
Without any deductions beyond the standard deduction, you pay ₹1,06,600 (including 4% cess). With basic 80C and 80D investments, this drops to ₹70,200. The old regime always costs more at this salary level unless you have both HRA and a home loan.
What is the Section 87A rebate for FY 2026-27?
Under the new regime, the 87A rebate provides up to ₹60,000 tax relief for resident individuals with taxable income up to ₹12,00,000. Under the old regime, the rebate is ₹12,500 for taxable income up to ₹5,00,000.
Can I claim 80C deductions under the new regime?
No. Section 80C, 80D, HRA, LTA, and home loan interest (Section 24b) are not available under the new regime. Only the standard deduction of ₹75,000 and employer NPS contribution under 80CCD(2) are allowed.
Which regime is better for ₹10 lakh salary?
The new regime is always better at ₹10 lakh. It gives you zero tax with no effort. Even with maximum old regime deductions (80C + 80D + HRA + NPS), you still pay ₹32,448. Only an extreme scenario combining HRA and home loan can bring the old regime to zero.
What is the monthly take-home on ₹10 lakh salary under the new regime?
With zero income tax, your approximate monthly gross take-home is ₹83,333. After EPF (12% of basic) and professional tax, actual in-hand is typically ₹75,000 to ₹79,000 depending on your salary structure.
Sources: Income Tax Department (incometaxindia.gov.in), Finance Act 2025, Income Tax Act 2025 (Sections 115BAC, 87A, 80C, 80D, 80CCD, 24(b), 10(13A)), ClearTax, BankBazaar, Bajaj Finserv, CAClubIndia. The new regime slabs and Section 87A rebate limits for FY 2026-27 remain unchanged from FY 2025-26 as confirmed by Union Budget 2026. Verify current rates on incometaxindia.gov.in before acting. This article is general information and not a substitute for professional advice.
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