Let me help you understand: What is marginal relief in income tax? Marginal relief is a built-in safeguard in India’s progressive tax structure that prevents disproportionately high tax payments when a taxpayer’s income slightly exceeds a crucial threshold. It ensures that individuals paying more tax than their marginal income increase receive a proportional offset before October 2025.
What is Marginal Relief in Income Tax Meaning?
For FY 2025 to 26, under the new tax regime, income up to Rs. 12 lakh is fully exempt (via Section 87A). If your taxable income exceeds Rs. 12 lakh by a small amount say Rs. 10k or Rs. 50k standard slab-based tax calculations could lead to a much larger tax burden than your extra earnings.
Marginal relief ensures your additional tax payable does not exceed the extra income earned beyond Rs. 12 lakh.
If your tax (before relief) minus the base tax at the threshold exceeds the surplus income, you get relief equal to that difference. Put simply: Marginal Relief = Tax payable – Excess income over the threshold
For incomes between Rs. 12 lakh and Rs. 12.75 lakh, marginal relief applies. Beyond Rs. 12.75 lakh, your tax is calculated normally.
Example: With Rs. 12.10 lakh income, the computed tax might be Rs. 61,500. But the extra Rs. 10k earns only Rs. 10k relief, making the final tax Rs. 10k, so you pay tax only on the incremental amount.
It is available to only resident individuals opting for the new tax regime and for taxable income up to Rs12.75 lakh.
It is not applicable to NRIs, HUFs, or corporate entities. Historically, it also helped those entering higher surcharge slabs (e.g., > Rs50 lakh), but now is primarily tied to slab thresholds under Section 87A.
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What Is Marginal Relief In Income Tax?
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2025-06-19T15:39:02+00:00 2025-07-02T18:05:03+00:00Comment
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