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What is Marginal Relief in New Tax Regime? 🤔

Under the New Tax Regime, if the assessee income is upto Rs. 7 Lacs, then that person will be allowed Rebate u/s 87A upto Rs. 25,000 and he need to pay Zero taxes on Rs. 7 Lacs income.

However, if the Income is slightly increased over Rs. 7 Lacs, then no rebate will be allowed and assessee might end up paying higher taxes than the Income increase itself.

To tackle such situation, the Govt. has introduced the concept of Marginal Relief under New Tax Regime.

The marginal relief for income tax rebate is a new amendment to Section 87A applicable only to the new tax regime. Instead of paying the full tax amount, if your income is over Rs. 7,00,000, you can pay only your excess income itself as your final tax.

🔵 Example:

If Mr. Amit's salary is Rs. 7,60,000 in FY 2023-24, and they have opted for a new tax regime. The standard deduction of Rs. 50,000 will apply, and consider that no other deductions are applicable. So, the total taxable income will be Rs. 7,10,000.

This income is Rs. 10,000, more than the prescribed limit of Rs. 7,00,000.

When tax is computed per the new tax regime, the total tax amount is Rs. 26,000. However, As per the new amendment, Mr. Amit can get marginal relief as they don't have to pay taxes greater than the excess income.

So, he can get a marginal relief of Rs. 16,000 (26,000 – 10,000). As a result, their total payable tax comes down to 10,000 (26,000 – 16,000).

#taxeffects #tax #finance #money #newregime #taxation


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