Finance Minister Nirmala Sitharaman announced a change in tax slab in the new regimen of income tax in Budget 2025. He also announced a big gift for the middle class. Income tax-free of up to Rs 12 lakh. After this, discussion started on social media. Users were worried that the tax burden will increase considerably as soon as the income crosses Rs 12 lakh. However, taxpayers breathed a sigh of relief after the budget document and finance bills were available online.
Yes, I Marginal Relief (Marginal Relief) I am talking about. This relief is for those whose income will be slightly more than Rs 12 lakh. Their tax will not be more than an income amount above Rs 12 lakh. In simple words, additional tax will be limited only to their extra income. The advantage of this will be that despite the income being slightly more than Rs 12 lakh, their tax will not increase much. However, this marginal relief is not new. It is already available in the new regimen of income tax. First we talk a little about it. Then we will also talk about who will be entitled to tax-free income of Rs 12 lakh.
Who will get the benefit of section 87A?
First it is important to know that tax-banfit on income up to Rs 12 lakh is not available to every person. Only individual taxpayers who are residents in India can take advantage of this benefit. Under the new Regim, this relief has now been increased to Rs 60,000.
What is Marginal Relief under Section 87A?
Margin Relief was started in Finance Bill, 2023 under Section 87A of the Income Tax Act. This is for taxpayers using the new regimen of income tax. This benefit has been continued for those whose income is more than Rs 12 lakh in the budget 2025.
Let us understand what is the marginal relief in the Finance Bill 2025 and how it will affect your tax liability.
Taxable Income for Financial Year 2025-26
| 12,00,000 | 12,10,000 | 12,70,000 | 12,75,000 | |
| Tax Calculation (Budget 2025) under New Tax Regime | 0 (Relief 60,000 under Section 87A) | 61,500 | 70,500 | 71,250 |
| Net income of more than 12 lakh rupees | 0 | 10,000 | 70,000 | 75,000 |
| Is Marginal Relief available? | , | Yes | Yes | No |
| Tax calculus under new regimen | 0 | 10,000 | 70,000 | 71,250 |
Is there an additional benefit for salary individuals?
Taxpayers who use the new regimen get a special deduction of Rs 75,000 on salary income. Therefore, if the total income of a person including salary income is Rs 12.75 lakh, then due to standard deduction, his taxable income will be reduced to Rs 12 lakh. With this, he will be entitled to the relief received under section 87A. This means that he will not have to pay tax.
Similarly, whether a person will get the benefit of marginal relief or not will depend on his taxbell income. Its calculus will be after decreasing standard deduction. For example, in the calculation given below, if Rs 75,000 is reduced from the current income, then adjustable income will be in this way:
-12.85-75,000 rupees = taxable income: Rs 12,10,000
-13.45 -75,000 rupees = taxable income: Rs 12,70,000
Will Relief be available under section 87A on a capital gains or any other special rate income?
No, the rebate under section 87A is not available from the capital gain on income or lottery income, which is taxed at a special rate. For example, this rebate is not found on equity share, long -term or short -term capital gains or long -term capital gains on equity oriented mutual funds.
(The author is CA and personal finance, especially income tax related issues)