Income Tax Calculation: Is your salary income Rs 12,90,000? Will you be taxed at a new tax regime of Rs 15,000 or Rs 12,90,000?
Income tax calculation: Taxpayers receive the benefits of tax relief while filing an Income Tax Return (ITR) and tax them no more than incremental income if their income is slightly higher than the tax exempt income limit. It will apply to taxpayers who will file their income tax returns in the 2025-26 fiscal year. The new tax regime for fiscal 25-26 provides tax-free income of Rs 12,00,000 for non-selling individuals.
For salaried individuals, the same limit is Rs 12,75,000, of which Rs 75,000 is the standard deduction under Section 87A of the Income Tax Act.
But what if your salary is slightly above the tax exemption limit?
What if your salary earns Rs 12,90,000 per year?
Will you be taxed at Rs 12,90,000 or just Rs 15,000?
Know how marginal relief works and may benefit you.
How does marginal relief work?
Marginal relief applies to taxpayers whose income is slightly above the tax exemption limit.
In marginal relief, taxpayers whose income is slightly above the exemption limit cannot pay more taxes than their incremental income.
Let’s take a salary of Rs 13,00,000 as a role model for salary-grade taxpayers. Under the tax board in the new tax system, they will be taxed like this –
0 to 4,00,000 rupees – zero
4,00,001 rupees to 8,00,000 rupees 20,000 rupees
Rs 8,00,001 to Rs 12,00,000 Rs 40,000
Rs 12,00,001 to Rs 13,00,000 Rs 15,000
Total = Rs 75,000 + 4% Rs 75,000 (education tax) = Rs 78,000
However, since incremental income is only Rs 25,000 higher than the tax exemption limit, and the actual income tax rate of Rs 25,000 is below Rs 78,000, the taxpayer will have to pay Rs 25,000, plus 4% of Rs 25,000 = Rs 26,000
What would that be the tax rate for Rs 12,90,000?
According to the board, it priced at Rs 73,500, accounting for 4% of Rs 73,500 (CESS).
However, as the incremental income is only Rs 15,000, which is below Rs 73,500, the taxpayer will pay Rs 15,000 of Rs 15,000 of Rs 15,000 after tax relief.
Therefore, in this case, the total tax liability will be Rs 15,600.
