New Tax Slab Update:
Finance Minister Nirmala Sitharaman presented the Union Budget 2025 on February 1. In this budget, income up to ₹12 lakh has been made tax-free. This change was introduced under the new tax regime. Now, the question is: What if your income is ₹12.20 lakh? Will you have to pay tax according to the ₹12-16 lakh slab? The answer is no.

Increased Rebate Under Section 87A
To make income up to ₹12 lakh tax-free, the government has increased the rebate under Section 87A. Earlier, under the new tax regime, no tax was charged on income up to ₹7 lakh because of a ₹25,000 rebate. Now, the rebate has been increased to ₹60,000, making income up to ₹12 lakh completely tax-free.

Who Benefits from Marginal Relief?
Under the tax slab for ₹12 to ₹16 lakh, an income of ₹12.20 lakh would attract ₹63,000 in tax. However, you only need to pay ₹20,000 due to marginal relief. Marginal relief is available for those earning up to ₹12.75 lakh. Beyond this amount, taxpayers must pay according to the regular tax slab without any relief.

What is Marginal Relief?
Marginal relief ensures that if your income slightly exceeds the tax-free limit, you don’t have to pay tax on the entire income. Instead, you only pay tax on the extra amount. For instance, if your annual income is ₹12.30 lakh, you would only need to pay tax on ₹30,000, not the whole income.