Income Tax Calculation: According to the new tax regime, people with income up to Rs 12.75 lakh can take their entire salary as take-home. They will not have to pay a single rupee of income tax.
Income Tax Calculation: Finance Minister Nirmala Sitharaman has made a big announcement in Budget 2025. Now people with annual income up to Rs 12 lakh will not have to pay any income tax. This exemption will be available after adjusting the standard deduction and revised tax rebate. Earlier, where a tax rebate of Rs 25,000 was available on income up to Rs 7 lakh, now it has been increased to Rs 12 lakh.
Tax calculation on income of Rs 12.75 lakh (New Tax Regime)
If your annual salary is Rs 12.75 lakh, let’s see whether you have to pay tax or not. According to the new rules, people with annual income up to Rs 12.75 lakh will not have to pay any tax. Know how-
Standard Deduction: Rs 75,000
Taxable income after deduction: Rs 12,75,000 – Rs 75,000 = Rs 12,00,000
New Tax Regime slabs:
Income up to Rs 4 lakh: 0% tax → Rs 0
Rs 4 lakh – Rs 8 lakh: 5% tax → Rs 20,000
Rs 8 lakh – Rs 12 lakh: 10% tax → Rs 40,000
Total tax liability before rebate: Rs 20,000 + Rs 40,000 = Rs 60,000
Tax rebate under section 87A: Rs 60,000
Final tax liability: Rs 60,000 – Rs 60,000 = Nil
No tax up to Rs 12.75 lakh!
That is, there is no tax liability on annual income up to Rs 12.75 lakh, so your take-home salary will be Rs 12.75 lakh per annum. This means that people with income up to Rs 12.75 lakh can take the entire salary take-home. They will not have to pay a single rupee of income tax.
Tax calculation for Rs 13 lakh annual income
Now, let’s calculate the tax for people earning Rs 13 lakh annually under the new tax regime.
Standard Deduction: Rs 75,000
Taxable income after deduction: Rs 13,00,000 – Rs 75,000 = Rs 12,25,000
New tax regime slabs:
Income up to Rs 4 lakh: 0% tax → Rs 0
Income between Rs 4 lakh and Rs 8 lakh per annum: 5% tax → Rs 20,000
Income between Rs 8 lakh and Rs 12 lakh per annum: 10% tax → Rs 40,000
Income between Rs 12 lakh and Rs 12.25 lakh per annum: 15% tax → Rs 3,750
Total tax liability before cess: Rs 20,000 + Rs 40,000 + Rs 3,750 = Rs 63,750
Health and education cess (4%): Rs 2,550
Total tax liability after adding cess: Rs 63,750 + Rs 2,550 = Rs 66,300
Net take-home salary: Rs 13,00,000 – Rs 66,300 = Rs 12,33,700
Now at first glance, you will feel that people earning Rs 12.75 lakh can bring home their entire salary by saving tax on the entire Rs 12.75 lakh, whereas people earning Rs 13 lakh will be able to bring home only Rs 12.33 lakh after tax, which is less than that. Therefore, the government gives marginal relief i.e. partial relief to people earning a little above the exemption limit.
What is Marginal Relief Provision?
Marginal Relief ensures that taxpayers whose income is slightly more than Rs 12 lakh are given tax relief, so that a person earning slightly above the exemption limit does not get less salary than a person below the limit. Therefore, the government provides partial relief.
Marginal relief calculation for Rs 13 lakh
Additional income above Rs 12 lakh = Rs 1,00,000
Tax liability without marginal relief = Rs 66,300
Marginal tax liability should not exceed Rs 1,00,000.
To ensure that a person earning Rs 13 lakh per annum does not get less salary than a person earning Rs 12 lakh, the payable tax will be adjusted to Rs 25,000 instead of Rs 66,300. Thus, the net take home salary will be = Rs 13,00,000 – Rs 25,000 = Rs 12,75,000
Note- This calculation has been done according to the new tax regime. If you are in the old tax regime, then the exemptions and deductions may be different.
