Earning up to Rs 12 lakh ? Here’s how new marginal tax relief benefits you
Union Budget 2025: One of the key highlights of Budget 2025 was that individuals Earning up to Rs 12 lakh will not have to pay any income tax under the new tax regime.
New Income-tax Slabs and Rates 2025-26 for salaried employees and senior citizens: Income-tax calculator shows the proposed slabs and rates in Union Budget 2025 will benefit most of the taxpayers opting for the New Tax Regime. Experts say Finance Minister Nirmala Sitharaman has finally responded to middle-class worries with tax cuts, making income up to ₹12 lakh tax-free. She has also proposed TDS limit hike for senior citizens, making bank and post office deposits attractive.
Finance Minister Nirmala Sitharaman announced major income tax relief in Budget 2025, placing more money in the hands of taxpayers and bringing changes to how they calculate their dues.
One of the key highlights is that individuals earning up to Rs 12 lakh will not have to pay any income tax under the new tax regime. However, this change has also led to some confusion, particularly regarding the terms ‘rebate’ and ‘marginal relief.’
With the introduction of new tax slabs, the Income Tax department has addressed concerns through explanations.
While the rebate ensures that those earning up to Rs 12 lakh have no tax liability, marginal relief helps taxpayers who earn slightly above this limit so that they do not end up paying much higher taxes than those below the threshold.
What is marginal tax relief?
Marginal relief is a benefit given to individuals earning just over Rs 12 lakh. It ensures that the extra tax payable is not more than the additional income earned beyond the rebate limit. This prevents a situation where a small increase in income leads to a sharp jump in tax liability.
For example, if a person earns Rs 12.10 lakh, their tax liability under the revised slabs would be Rs 61,500. However, with marginal relief, the individual would only need to pay Rs 10,000 as tax. This keeps their post-tax income close to that of someone earning Rs 12 lakh, who pays no tax.
New tax slabs and rates
Under the revised new tax regime, the updated income tax slabs are:
- Rs 0-4 lakh – Nil
- Rs 4-8 lakh – 5%
- Rs 8-12 lakh – 10%
- Rs 12-16 lakh – 15%
- Rs 16-20 lakh – 20%
- Rs 20-24 lakh – 25%
- Above Rs 24 lakh – 30%
While the rebate and marginal relief are aimed at benefiting salaried individuals and small business owners, they do not apply to special categories of income. Taxpayers with income from capital gains, lottery winnings, or other special-rate earnings are not eligible for this relief. The marginal relief benefit applies strictly to standard income taxed under Section 115BAC.
With Thanks and Reference to:https://www.indiatoday.in/business/story/marginal-tax-relief-now-applies-to-income-up-to-rs-12-lakh-what-it-means-for-you-budget-2025-announcements-2673766-2025-02-03 and https://upstox.com/news/personal-finance/tax/union-budget-income-tax-slab-2025-26-live-updates/liveblog-143548/
