In the Union Budget last week, Finance Minister Nirmala Sitharaman announced a tax waiver for income up to ₹12 lakh in FY2025-26, enabling more savings for ordinary citizens. Additionally, under the revised Section 115BAC (1A), resident individuals earning slightly above ₹12 lakh will also be eligible for marginal relief. So, what is marginal relief? Let’s understand this with an example. Consider someone with an income of ₹13.45 lakh. Without marginal relief, the individual would pay ₹70,500 in taxes (calculated as 5% of ₹4 lakh, plus 10% of ₹4 lakh, plus 15% of ₹70,000 after standard deduction of ₹75,000). However, thanks to marginal relief, their actual tax liability is reduced to ₹70,000. Note, under the new tax regime, marginal relief can be claimed only up to an income of ₹12.70 lakh. According to CA Ashish Niraj, Partner, ASN Company, Chartered Accountants, “The new budget allows nil tax up to ₹12 lakh income. For income above ₹12 lakh, while tax is calculated as per new slabs, marginal relief ensures that taxpayers don't pay more tax than their excess income above ₹12 lakh. “For example, on income of ₹12.70 lakh, regular tax would be ₹70,500, but since the excess income is only ₹70,000, marginal relief of ₹500 is provided, making the final tax liability ₹70,000 (plus 4% education cess). This relief is available for incomes up to ₹12.70 lakh.” The relief sum can be higher if income after standard deduction (available only to salaried individual) exceeds ₹12 lakh slightly, say, ₹12.10 lakh. In this case, you will pay only ₹10,000. Niraj explains, “On ₹12.10 lakh income, actual tax liability comes to ₹61,500, here marginal relief will be ₹51,500, (₹61,500-₹10,000). Hence, net tax liability will be ₹10,000 only (₹61,500-₹51,500). Here’s how marginal relief is computed (Example) Q: Under the new tax regime, what is the ceiling amount for tax rebate? A: Maximum rebate up to ₹60,000 for income of ₹12 lakh as per the new slabs. Q: Up to what income level can taxpayers benefit from marginal relief provisions? A: ₹12,70,000. Q: Are lottery winnings and capital gains covered under the tax rebate scheme? A: No rebate on income from capital gains. It is available only on the tax payable as per slabs under section 115BAC. Q: How do tax rebate and marginal relief provisions differ in their application? A: Rebate is the deduction from tax which is available to tax payers having income up to ₹12 lakh in the new regime. Marginal relief ensures that taxpayers having income marginally higher than ₹12 lakh do not pay tax more than the income in excess of ₹12 lakh.Original Article