This year in February, Finance Minister Nirmala Sitharaman presented the Union Budget and gave a big relief to taxpayers. The income tax exemption limit has been increased from ₹7 lakh to ₹12 lakh under the new tax regime. This means if your annual income is up to ₹12 lakh, you don’t have to pay a single rupee in tax. But what if your income is more than ₹12.75 lakh? Don’t worry—by using some smart tips, you can still make your income tax-free. Let’s understand how in the details below.
You Can Still Save Tax Even If You Earn More Than ₹12 Lakh
Now many people earning ₹12.75 lakh or more annually might be wondering—will earning just a little more cost them ₹60,000 in taxes? The good news is, even if your income exceeds the exemption limit slightly, you can still benefit from marginal relief and reduce your tax burden. Let’s break it down with proper calculations below.
Know the Rule to Save Tax
If your income is just above the exemption limit under the new tax regime, you are eligible for something called marginal relief. This means the extra tax you pay won’t be more than the income you earned over the limit. So, the tax is limited to the exact amount you exceed the exemption limit by.
Let’s Understand with an Example
Suppose your annual income is ₹12,00,001 – just ₹1 above the exemption limit. Technically, you would fall into the taxable category. In this case, even though the calculated tax may come to ₹60,000 on ₹12 lakh, you will only have to pay ₹1 tax—because that’s how much you exceeded the limit by. You get a marginal relief of ₹59,999.
How Much Tax to Pay at Different Income Levels
Let’s now look at how much tax you will need to pay after applying the ₹75,000 standard deduction and the marginal relief rule.
If your taxable income is ₹12,10,000
(After standard deduction of ₹75,000)
Your total tax comes to ₹61,500.
You get a marginal relief of ₹51,500.
You only need to pay ₹10,000 in tax.
If your taxable income is ₹12,50,000
(After standard deduction of ₹75,000)
Your total tax comes to ₹67,500.
You get a marginal relief of ₹17,500.
You only need to pay ₹50,000 in tax.
If your taxable income is ₹12,70,000
(After standard deduction of ₹75,000)
Your total tax comes to ₹70,500.
You get a marginal relief of ₹500.
You only need to pay ₹70,000 in tax.
If your taxable income is ₹12,75,000
(After standard deduction of ₹75,000)
Your total tax comes to ₹71,250.
No marginal relief is applicable.
You must pay the full ₹71,250 tax.