The edge tax cut explains: Is your salary 12,89,000 rupees? Do you need to pay tax at a price of Rs 12,89,000 or Rs 14,000?
The edge tax cut explains: The concept of fringe tax cuts is ancient. It applies when your income is slightly above the tax-free income limit. It allows you to pay only taxes equal to incremental income. But how to apply? Who benefits from it? What is its importance for the 2025-26 fiscal year?
The tax-exempt income limit in the revised new tax regime tablet is Rs 12,75,000, but what if you get Rs 12,89,000 in FY25-26?
Would you be taxed on your entire income, or would you just increase your income of Rs 14,000?
See Calculation to have a clear idea.
New tax system for fiscal year 2526
In the 2025 budget, Finance Minister Nirmala Sitharaman revised the income tax board for the new tax system.
These tablets will apply to revenues earned in fiscal 25-26. Incomes with income up to Rs 4,00,000 have zero tax.
After that, 5% of the tablet started, which was as high as 30% of the revenue of Rs 2.4 lakh.
The tax-free income limit for non-tax individuals is Rs 12 lakh and Rs 12,75,000 for individuals at the salary level. What does this actually mean?
Rebate income
As you can see in the table, zero tax is imposed on income up to Rs 4 lakh, so is Rs 12 lakh tax exempt?
Of the income of Rs 12 lakh, the total income tax on the board is Rs 60,000. However, under Section 87A of the Income Tax Act 1961, the maximum tax discount applicable is Rs 60,000. Therefore, the income is Rs 1.2 lakh.
Standard deduction
Sailed individuals received a tax benefit of Rs 75,000 in the form of standard deductions, so their income is as high as Rs 12,75,000 and will be tax-free. In addition to marginal tax cuts, it will also apply.
Edge tax cuts
Under the marginal tax relief, if your income exceeds Rs 1.2 lakh profit margin, your taxes will not exceed incremental income.
Marginal tax relief will apply to income up to Rs 12,75,000 (excluding marginal tax relief for paid individuals).
For example, if your income is Rs 12,20,000, you don’t have to tax the entire income, but it will be 4% of Rs 20,000 (incremental income) plus Rs 20,000 as an educational CESS.
However, if your income is Rs 12,75,000, your income is Rs 75,000, but your tax is Rs 71,250. In this case you will pay Rs 71,250 instead of Rs 75,000.
What will be the salary of Rs 12,89,000?
Since we take individuals at the salary level as an example, a standard deduction of Rs 75,000 will apply. After that, taxable income is Rs 12,14,000.
In this case, the tax rate on the board is Rs 62,100, but the incremental income is Rs 14,000. Therefore, the total tax rate is 14,000+4% Rs 14,000 = Rs 14,560.
