- February 4, 2025
Latest income tax slabs 2025-26: How much tax do individuals earning slightly above Rs 12 lakh have to pay? Marginal relief calculations explained – The Times of India
Latest income tax slabs 2025-26 post Budget 2025: Finance Minister Nirmala Sitharaman announced ZERO or NIL tax liability for individuals earning up to Rs 12 lakh in the Union Budget 2025 under the new income tax regime. For salaried individuals, including the standard deduction, this limit is Rs 12.75 lakh under the new regime.
But what about individuals with taxable income slightly above Rs 12 lakh? Will they have to pay more income tax than their additional earnings above Rs 12 lakh? Will someone earning Rs 12,10,000 face a Rs 61,500 tax burden versus an individual earning Rs 10,000 less who will pay nothing?
There’s good news! Here’s where the concept of marginal relief comes us. Individuals with income slightly above Rs 12 lakh, which is the nil tax threshold, will receive fair treatment through marginal tax relief.
According to the Income Tax Department, in the new tax regime under section 115BAC(1A), marginal relief is available to resident individuals who have taxable income marginally above Rs 12 lakh. The total income till which marginal relief is available is near about Rs 12,75,000/-.
Latest income tax slabs 2025-26: How is the marginal relief computed?
For example, for a person having income of Rs 12, 10,000/-, in the absence of marginal relief, the tax works out to be Rs 61,500/- (5% of Rs 4 lakh + 10% of 4 lakh and 15% of Rs 10,000). However, due to marginal relief, the amount of tax to be actually paid is Rs 10,000/-)
Also Read | Income Tax slabs 2025-26: How you can pay ZERO tax with Rs 13.7 lakh salary under new income tax regime
The marginal relief is computed in the following manner:-
- First the tax as per slab rate is computed on the total income. For e.g. tax on the total income of Rs. 12,10,000/-shall be computed in following steps:
- Tax payable on total income of Rs. 12,00,000/- on which rebate is available is Nil.
- Now, the tax liability without marginal relief (in this case Rs. 61,500) shall be compared with the amount exceeding total income up to which rebate is available [in this case Rs 10,000, [i.e. Rs.12,10,000- Rs. 12,00,000]
- The marginal relief shall be computed by deducting the income exceeding Rs 12, 10,000 (i.e. Rs.10,000) from total tax liability determined in this case (i.e. Rs. 61,500).
- Therefore, in this case rebate by way of marginal relief is Rs 51,500 (61,500/- 10,000/-= 51,500/-) is allowed.
- Tax payable is therefore Rs 10,000 [Rs 61,500-Rs 51,500]
Marginal relief examples:
- For income of Rs 12,50,000, the tax liability reduces from Rs 67,500 to Rs 50,000 with marginal relief.
- At Rs 12,70,000 income level, the tax obligation decreases marginally from Rs 70,500 to Rs 70,000 with the relief provision.
- At Rs 12,75,000 income, the tax payable is Rs 71,250, and marginal relief becomes inapplicable.
Latest Income Tax Slabs FY 2025-26 Under New Income Tax Regime
It’s important to note that rebate is offered to individuals with taxable income up to Rs 12 lakh under the new tax regime. This is different from marginal relief for taxpayers whose earnings slightly exceed Rs 12 lakh. Marginal relief provisions ensure that their tax liability does not surpass the amount by which their income exceeds Rs. 12 lakh.
Also Read | New vs old income tax regime after Budget 2025: Post income tax slab changes, which tax regime is better for salaried middle class taxpayers?
