Marginal Relief in the New Tax Regime – What You Need to Know
- Rajiv Kumar
- Mar 8
- 2 min read
Many taxpayers worry about higher tax liability when their income slightly exceeds a tax slab threshold. The Marginal Relief provision ensures that the extra tax payable does not exceed the additional income earned, preventing an unfair tax jump.
What is Marginal Relief?
Marginal relief is designed to reduce excessive tax burdens when income slightly surpasses a tax slab or surcharge threshold. It ensures that the additional tax payable is not disproportionately higher than the extra income earned.
Who Benefits from Marginal Relief?
Individuals & HUFs opting for the New Tax Regime.
Taxpayers earning slightly above ₹7 lakh, who would otherwise lose the ₹25,000 rebate under Section 87A.
High-income earners whose income crosses ₹50 lakh or ₹1 crore, triggering a surcharge of 10%-37%.
Businesses facing a sudden increase in tax burden due to minor income fluctuations.
How Marginal Relief Works in the New Tax Regime
1. For Individuals (₹7 Lakh Limit)
Under the new tax regime, income up to ₹7 lakh is tax-free due to the Section 87A rebate.
If taxable income slightly exceeds ₹7 lakh (e.g., ₹7,05,000), the rebate is lost, causing a significant tax jump.
Marginal relief ensures the additional tax payable is not higher than the extra ₹5,000 earned.
2. For High-Income Earners (Surcharge Marginal Relief)
Income above ₹50 lakh and ₹1 crore is subject to a surcharge of 10%-37%.
If income slightly exceeds these limits, marginal relief ensures the surcharge does not create a disproportionately high tax liability.
Why is Marginal Relief Important?
Prevents an unfair tax burden due to minor income increases.
Saves taxpayers money by keeping taxes proportional to earnings.
Helps individuals and businesses plan income, salaries, and investments more effectively.
How to Claim Marginal Relief?
Marginal relief is calculated automatically when filing income tax returns.
Businesses and high-income earners must carefully structure their income to optimize tax liability.
Understanding marginal relief can help you avoid unnecessary tax payments and maximize savings. If your income is close to a tax threshold, consider strategic tax planning to make the most of this benefit.
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