The Finance Minister gave great relief in income tax on 1 February. He said that people with income up to Rs 12 lakh annually will not have to pay tax. This relief is given in the new regimen of income tax. This is a big relief, as it was expected that the government would pay income tax-free of up to Rs 10 lakh. However, the government paid income tax-free of up to Rs 12 lakh. The question is, if your income is 12.20 lakh rupees, then you will have to pay the entire tax?
Income tax-free of up to Rs 12 lakh
The government has increased the rebate of section 87A to tax-free income of up to Rs 12 lakh. Earlier, there was an income tax-free of up to Rs 7 lakh annually in the new tax regimen. For this, a rebate of Rs 25,000 was received under section 87A. The government has increased the rebate of section 87A from Rs 25,000 to Rs 60,000 to tax-free income of up to Rs 12 lakh.
Income is more than 12 lakhs and relief
The question is that if your income is Rs 12.20, then you will have to pay tax according to the tax slab ranging from 12 lakh to 16 lakh rupees? It does not have its divide. You have to pay tax, but it will be very less. Your tax on more than 12.20 lakh income will increase to Rs 63,000. But, instead you will have to pay only Rs 20,000 tax. The reason for this is Marginal Relief.
Marginal Relief means
Under the Marginal Relief, those people get relief from paying more taxes, whose income is slightly higher than the tax and script. Marginal Relief benefits those who have income up to Rs 12.75 lakh. If a person’s income is more than Rs 12.75 lakh, then he will not be entitled to marginal relief. Then he will have to pay the entire tax according to the tax slab.
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This is how tax relief is available
Due to the marginal relief, you will have to pay only Rs 20,000 instead of Rs. 60,300 at Rs 12.20 lakh. This means that due to marginal tax, the income of more than 12 lakhs will come under the tax purview. If a person has an annual income of 12.30 lakhs, then he will have to pay only Rs 30,000 tax.