New Tax Regime Calculations: Is your annual income Rs 12,76,000? Will you be taxed on Rs 1,000, or Rs 12,76000? See calculations

Income Tax Calculations: The proposed new tax regime is all set to be implemented from April 1, 2025.

The revised new slabs will be available for taxpayers filing their income tax return (ITR) for the financial year 2025-26.

The most striking feature of the proposed regime is that a non-salaried-class individual doesn't need to pay tax on income up to Rs 12 lakh, while a salaried-class individual doesn't need to pay tax on income up to Rs 12.75 lakh.

But what if a salaried-class individual earns slightly over Rs 12.75 lakh?

What if the additional income is just Rs 1,000? Will the taxpayer have to pay tax on just Rs 1,000 or Rs 12.75 lakh? Read to know the answer.

Why is Rs 12 lakh income tax-free?

Before we answer this question, let's have a glance at the proposed new tax regime slabs.

As per the chart, if we calculate the tax on income up to Rs 12 lakh, the tax liability is Rs 60,000.

But under Section 87A of the Income Tax Act, 1961, the taxpayer gets a tax rebate up to Rs 60,000. So the total tax becomes zero on this income.

Why is tax-free limit Rs 12.75 lakh for salaried class individuals? 

Salaried class individuals also get a standard deduction of Rs 75,000 under Section 16(a). So, their taxable income becomes Rs 12 lakh. With a Rs 60,000 rebate, the tax liability is zero. 

Tax if income marginally increases?

There is no tax till Rs 12 lakh income, but what if it is Rs 1,000 more for a non-salaried individual?

What if a salaried class is earning Rs 12,76,000? Will they be taxed on Rs 1,000 or Rs 1,276,000?

To understand it, one must know the concept of marginal relief.

What is marginal relief?

Taxpayers get marginal relief under Section 87A. According to it, if the taxpayer's income exceeds Rs 12 lakh marginally, they do not pay more tax than their marginal income.

Example of how marginal relief benefits?

Suppose if a person earns Rs 12,10,000, the tax liability without marginal relief on this will be Rs 61,500 (excluding 4 per cent cess). But the lesser amount is Rs 10,000. So the tax will be Rs 10,000 plus 4 per cent cess (Rs 400)= Rs 10,400. 

Tax on Rs 12,76,000 income  

Here, after the standard deduction, the income will be Rs 12,01,000.

The total tax without marginal relief will be Rs 60,0150 (excluding cess). With marginal relief, the tax will be Rs 1,040 (including 4 per cent cess).