Income Tax Update 2026: Many salaried individuals are confused about why marginal relief is not available even after claiming standard deduction under the new tax regime. A common example is when taxable income reaches around ₹12.75 lakh—despite deductions, taxpayers may still miss out on marginal relief. Here’s a clear breakdown of why this happens and how the calculation works.
Understanding the New Tax Regime Slabs
Under the new tax regime, income is taxed based on slabs:
- Up to ₹4 lakh: No tax
- ₹4 lakh to ₹8 lakh: 5% tax
- ₹8 lakh to ₹12 lakh: 10% tax
- ₹12 lakh to ₹16 lakh: 15% tax
Additionally, a standard deduction of ₹75,000 is available for salaried individuals, which reduces taxable income.
What Is Marginal Relief?
Marginal relief is designed to ensure that a small increase in income does not lead to a disproportionately higher tax liability.
In simple terms:
- If your tax payable is more than the income exceeding ₹12 lakh, you may get marginal relief
- It ensures that extra tax does not exceed the extra income earned
Case Study: ₹13.4 Lakh vs ₹13.5 Lakh Salary
Let’s understand with two examples:
Case 1: ₹13.4 Lakh Annual Income
- After standard deduction: ₹12.65 lakh taxable income
- Tax payable: ₹69,750
- Income above ₹12 lakh: ₹65,000
Here, the tax (₹69,750) is higher than the extra income (₹65,000).
👉 Therefore, marginal relief applies, and tax is reduced.
Case 2: ₹13.5 Lakh Annual Income
- After standard deduction: ₹12.75 lakh taxable income
- Tax payable: ₹71,250
- Income above ₹12 lakh: ₹75,000
In this case, the extra income (₹75,000) is higher than the tax (₹71,250).
👉 Therefore, marginal relief does NOT apply.
Why ₹12.75 Lakh Misses Marginal Relief
The rule is straightforward:
Marginal relief is only available when tax exceeds the additional income above ₹12 lakh.
At ₹12.75 lakh taxable income:
- Extra income = ₹75,000
- Tax = ₹71,250
Since the tax is lower than the extra income, there is no excess burden—hence, no marginal relief is granted.
Key Takeaways for Taxpayers
- A small increase in salary can significantly impact your tax
- Marginal relief is not automatic—it depends on the comparison between tax and excess income
- Always calculate your post-deduction taxable income, not just gross salary
- Plan salary structure and deductions carefully to optimize tax liability
Expert Insight
Tax experts emphasize that understanding slab transitions is crucial under the new regime. Even a ₹10,000 increase in salary can change your eligibility for marginal relief, impacting your final tax outgo.
Final Thoughts
The ₹12.75 lakh example highlights how tax rules can sometimes feel counterintuitive. While the standard deduction reduces your taxable income, marginal relief depends strictly on a mathematical condition.
To avoid surprises, always run detailed tax calculations before the financial year ends and consider professional advice if needed.
