In FY 2025-26, No Income Tax will be paid on Income up to Rs. 12 Lakh with New Tax Regime. And with Standard Deduction of Rs. 75,000, No tax will e paid on income up to Rs. 12.75 Lakh with new tax regime. But what happens when income is 13 Lakh? You get Marginal relief and your tax liability will be Rs. 26,000 instead of Rs. 66,300 based on tax slab rates of 5% and 10% respectively. This marginal relief is available only in new tax regime to provide relief to tax payers, when the income is marginally above Rs. 12.75 Lakh for salaried employees.
Watch below video to understand how marginal relief will work in 2025-26 with examples.
Marginal Relief in New Tax Regime 2025-26 Video

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What is Marginal Relief
- Marginal relief is the relief provided to tax payers when their income is marginally above Rs. 12 Lakh
- As per Budget 2025, you get maximum Tax Rebate of Rs. 60,000 when your income is up to 12 lakh, due to which your tax liability will be Rs. 0
- But what happens when your income is 12.76 lakh so your taxable income becomes 12.01 Lakh after reducing standard deduction of Rs. 75,000?
- In this case, instead of paying Rs. 20,000 (5% on income between 4 lakh to 8 lakh) and Rs. 40,000 (10% on income between 8 lakh to 12 lakh) and Rs. 150 (15% on income between 12 lakh to 12.01 lakh), which makes your tax as Rs. 60150 + cess of 4%, you only have to pay the Rs. 1000 that is above Rs. 12 Lakh as income tax excluding cess of 4%
- Thus your income tax is Rs. 1040 on income of Rs. 12.76 Lakh considering standard deduction of Rs. 75,000 and marginal relief.
- So this is called marginal relief that is provided to you when your taxable income is slightly above 12 lakh with new tax regime in FY 2025-26
- This marginal relief was also available with 2024-25 when your taxable income was slightly above Rs. 7 lakh
ALSO WATCH: Income Tax Calculation Examples 2025-26
No Tax on Income up to Rs. 12 Lakh
- Based on new tax regime slab rates, 5% slab will be Rs. 20,000 on income between 4 lakh to 8 lakh and 10% slab will be Rs. 40,000 on income between 8 lakh to 12 lakh. Thus your income tax without cess should be Rs. 60,000 on 12 lakh income with new tax regime
- But Government of India provides you Tax rebate of this Rs. 60,000 for tax payers
- This will make your income tax as zero even when taxable income is Rs. 12 lakh
- Note that taxable income on above Rs. 12 lakh will attract tax based on marginal relief calculation or slab wise calculation, whichever is lower
- So if you are salaried employee and your income is below 12 lakh, you can select new tax regime to not pay any income tax without making any investments
- You can also opt for old tax regime, in which case taxable income up to Rs. 5 lakh will attract no tax, above which you have to pay tax with old regime, which does not include marginal relief
What is Income Tax on Rs. 13 Lakh?
- On income of 13 lakh and considering standard deduction of Rs. 50,000 and Rs. 75,000 with old and new tax regime, your taxable income will be Rs. 12.5 lakh and Rs. 12.25 lakh respectively
- So, with old regime you have to pay Rs. 1,95,000 without making any investments and Rs. 26,000 with new tax regime
Below is the screenshot of this calculation using fincalc Income Tax Calculator:

How much Tax on Income between Rs. 5 Lakh to 25 Lakh?
I have made a separate video on YouTube explaining the income tax calculation between 5 lakh to 13 lakh with old and new tax regime. Below is the income tax calculation for mentioned incomes:

Which Tax Regime is Better for FY 2025-26?
Considering No Income Tax on income up to Rs. 12 lakh, new tax regime seems to be better for people having income below Rs. 12 lakh. Even with income above Rs. 12 lakh, you will not have many deduction options to get your taxable income to below Rs. 5 lakh to pay zero income tax.
So it seems like new tax regime will be better option for FY 2025-26 which calculating your income tax. Anyway, ultimately the old tax regime will be removed from the system due to introduction of new tax regime to keep calculations more simple without any deductions or investment options.
Some more Reading:
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Income Tax Calculator App – FinCalC
For Income Tax Calculation on your mobile device, you can Download my Android App “FinCalC” which I have developed for you to make your income tax calculation easy.
What you can do with this mobile App?
- Calculate Income Tax for new FY 2024-25 and previous FY 2023-24
- Enter estimated Investments to check income tax with Old and New Tax Regime
- Save income tax details and track regularly
- Know how much to invest more to save income tax
- More calculators including PPF, SIP returns, Savings account interest and lot more

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