₹12 lakh tax-free: Finance Ministry clarifies on marginal relief; Here's how tax will work for income just above ₹12 lakh

Finance Minister Nirmala Sitharaman, during the Budget 2025 presentation in Parliament on Saturday, made annual income up to ₹12 lakh tax-free.

But what about those earning slightly more than ₹12 lakh per year? This category of taxpayers will receive relief in the form of “marginal relief” on income exceeding ₹12 lakh.

“For a person earning Rs 12,10,000, in the absence of marginal relief, the tax would amount to ₹61,500 (5% of ₹4 lakh + 10% of ₹4 lakh + 15% of ₹10,000). However, due to marginal relief, the actual tax payable is ₹10,000,” the Finance Ministry clarified today in a list of frequently asked questions on tax-related changes in the Budget.

“In the new regime under Section 115BAC(1A), marginal relief is available only to resident individuals with income marginally above ₹12 lakh,” it stated. Notably, income up to ₹12,70,000 will be eligible for marginal relief under the new tax regime.

“By providing marginal relief, it has been ensured that an individual earning slightly above ₹12 lakh pays only the marginal amount of tax equivalent to the income exceeding ₹12 lakh, ensuring a take-home income of ₹12 lakh. In this case, the individual will be required to pay a tax of ₹10,000,” the ministry further noted in its FAQ.

For an annual income of ₹12.5 lakh, the tax with marginal relief will be ₹50,000, compared to ₹67,500 as per the slab rates.