Why Tax of Rs. 26,000 on 13 Lakh Income in New Tax Regime? [Video]

You need to pay tax of Rs. 26,000 on 13 lakh income with new tax regime in FY 2025-26, instead of Rs. 66,300, due to marginal relief benefit. Based on marginal relief under Section 87A, if your income is slightly above Rs. 12.75 lakh in FY 2025-26, you only have to pay the amount that is above Rs. 12.75 Lakh as tax, excluding the cess of 4%. This relief is provided only in new tax regime so that the taxation is fair for all of us.

We will understand this with the help of examples in this article, but first watch below video on marginal relief with income tax calculation in FY 2025-26.

Table of Contents

What is Marginal Relief? [Video]
No Tax up to 12 Lakh Taxable Income in FY 2025-26
- Income Tax Slab Rates FY 2025-26
- Income Tax Calculation on 12.75 Lakh Gross Income
Marginal Relief Section 87A example
How much Tax on 13 Lakh Income
Marginal Relief Section and how to be eligible?
Conclusion

What is Marginal Relief? [Video]

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No Tax up to 12 Lakh Taxable Income in FY 2025-26

Based on changes in Budget 2025, no tax need to be paid if income is 12 lakh or below for FY 2025-26 using new tax regime
New tax regime does not allow many deduction options, but you can claim few of them as mentioned in new tax regime deductions article
With standard deduction of Rs. 75,000 in Fy 2025-26, your gross income can be Rs. 12,75 lakh, up to which you don’t have to pay any income tax

Let us first see the income tax slab rates for FY 2025-26 in old and new tax regime.

Income Tax Slab Rates FY 2025-26

Below are the tax slab rates for old tax regime:

Income	Tax Slab Rates (Old Tax Regime)
Rs. 0 – Rs. 2.5 Lakh	0%
Rs. 2.5 Lakh – Rs. 5 Lakh	5%
Rs. 5 Lakh – Rs. 10 Lakh	20%
Rs. 10 Lakh or above	30%

Below are the tax slabs for new tax regime applicable for all age groups:

Income	Tax Slab Rates (New Tax Regime)
Rs. 0 – Rs. 4 Lakh	0%
Rs. 4 Lakh – Rs. 8 Lakh	5%
Rs. 8 Lakh – Rs. 12 Lakh	10%
Rs. 12 Lakh – Rs. 16 Lakh	15%
Rs. 16 Lakh – Rs. 20 Lakh	20%
Rs. 20 Lakh – Rs. 24 Lakh	25%
Rs. 24 Lakh or above	30%

Let us now understand the income tax calculation on 12.75 lakh gross income for salaried employee

Income Tax Calculation on 12.75 Lakh Gross Income

Items	Amount
Gross Income	Rs. 12.75 Lakh
Standard Deduction	Rs. 75,000
Taxable income	Rs. 12 Lakh
5% Tax (Rs. 4 lakh to Rs. 8 Lakh)	Rs. 20,000
10% Tax (Rs. 8 Lakh to Rs. 12 Lakh)	Rs. 40,000
Tax based on slab rates	Rs. 60,000
Tax Rebate Section 87A	Rs. 60,000
New Income Tax	Rs. 0

Income Tax Calculation on 12.75 Lakh gross income for Fy 2025-26

As seen in above table, you get standard deduction of Rs. 75,000 if you are a salaried employee or pensioner, which reduces your taxable income to Rs. 12 Lakh
On this taxable income, based on income tax slab rates for FY 2025-26 in new tax regime, your tax will be Rs. 20,000 and Rs. 40,000 for 5% and 10% slab rates respectively
This makes total tax as Rs. 60,000 without including cess of 4%
But since your taxable income is within Rs. 12 Lakh with this new tax regime, you also get rebate of maximum Rs. 60,000 under Tax Rebate Section 87A
Hence your net income tax will be Rs. 0 on income up to Rs. 12.75 Lakh

Note that income tax is ZERO with new tax regime above. You need to pay tax with old tax regime as per above slab rates.

Marginal Relief Section 87A example

Now since we have understood the tax calculation example for 12.75 lakh gross income, let us understand what happens when income is slightly above Rs. 12.75 Lakh
For example, if your gross income is Rs. 12.80 lakh, you won’t be able to get tax rebate 87A relief since taxable income will be Rs. 12.05 lakh after reducing standard deduction of Rs. 75,000 with new tax regime
Does this mean you have to pay Rs. 60,000 as tax based on 5% and 10% slab rates that we have seen in above example? NO.
Since your income is Rs. 5000 extra (above Rs. 12 Lakh), you only have to pay this extra amount, that is Rs. 5000 + 4% cess as income tax, instead of paying Rs. 60,000+ tax. This is due to marginal relief
Based on slab rates calculation and marginal relief calculation, the lower amount will be considered as income tax.

Below is the table with income tax calculation based on slab rates and marginal relief:

Taxable Income	Tax Slabs Calculation	Marginal Relief Calculation	Tax Payable
Rs. 12 Lakh	Rs. 0	Rs. 0	Rs. 0
Rs. 12.10 Lakh	Rs. 63,960	Rs. 10,400	Rs. 10,400
Rs. 12.20 Lakh	Rs. 65,520	Rs. 20,800	Rs. 20,800
Rs. 12.30 Lakh	Rs.67,080	Rs. 31,200	Rs. 31,200
Rs. 12.40 Lakh	Rs. 68,640	Rs. 41,600	Rs. 41,600
Rs. 12.50 Lakh	Rs. 70,200	Rs. 52,000	Rs. 52,000
Rs. 12.60 Lakh	Rs. 71,760	Rs. 62,400	Rs. 62,400
Rs. 12.70 Lakh	Rs. 73,320	Rs. 72,800	Rs. 72,800
Rs. 12.80 Lakh	Rs. 74,880	Rs. 83,200	Rs. 74,880
Rs. 12.90 Lakh	Rs. 76,440	Rs. 93,600	Rs. 76,440

As seen in above table, the lower income tax between slab rates calculation and marginal relief calculation will be considered as the actual income tax to be paid with new tax regime.

Note that marginal relief is not available with old tax regime.

How much Tax on 13 Lakh Income

So we have already seen the marginal relief benefit in above examples of income tax calculation. So what will be the income tax with gross income of 13 lakh for salaried employee?

Since the salaried employee will get standard deduction of Rs. 75,000, the taxable income will be Rs. 12.25 Lakh with new tax regime.

Below is the income tax calculation based on slab rates and marginal relief:

Label	Amount
Gross Income	Rs. 13 Lakh
Standard Deduction	Rs. 75,000
Taxable Income	Rs. 12.25 Lakh
Tax based on slab rates	Rs. 66,300
Tax based on Marginal Relief	Rs. 26,000

Income Tax Calculation FY 2025-26 on 13 Lakh Income

So as seen above, marginal relief will help you to save income tax, so that you pay Rs. 26,000 as income tax instead of Rs. 66,300 based on slab rates calculation.

Marginal Relief Section and how to be eligible?

Marginal relief belongs to section 87a similar to tax rebate section.

You will be eligible for marginal relief automatically, based on your gross income and taxable income in FY 2025-26, provided you select new tax regime while filing Income Tax Returns (ITR).

Conclusion

So marginal relief provides you the benefit of paying less income tax compared to the tax calculation as per the income tax slab rates. This marginal relief is provided so that taxation is fair for all individuals irrespective of their income.

It is important to note that marginal relief is only available with new tax regime. Old tax regime does not allow marginal relief benefit when your taxable income is slightly above 5 lakh in a financial year.

Some more Reading:

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