Proposed New Tax Regime Calculations: Is your salary Rs 12,78,000? Will you be taxed on Rs 3,000, or Rs 12,78,000; check details

New Tax Regime Calculations: For the financial year 2025-26, taxpayers can pay their tax as per the proposed new tax regime.

Finance Minister Nirmala Sitharaman announced the proposed slabs in her Budget 2025 speech in February 2025.

The striking change is that the tax-free income limit has been increased from Rs 7,00,000 to Rs 12,00,000.

For salaried individuals, the tax-free limit is Rs 12,75,000.

But what if someone is earning slightly more than that?

What if a non-salaried individual is earning Rs 12,03,000, and a salaried individual is earning Rs 12,78,000?

Will they be taxed on their entire salary or just the incremental income of Rs 3,000? Know what the taxation rule says— 

Tax slabs for proposed new regime

Let's begin with tax slabs for the revised tax regime. 

When will proposed new tax regime be applicable?

The proposed new tax regime will be implemented from April 1, 2025. Taxpayers filing their income tax return (ITR) for the financial year 2025-26 can pick the proposed tax regime.  

What is tax-free limit in proposed tax regime?

Non-salaried individuals get a maximum tax rebate of Rs 60,000, while salaried individuals also get a standard deduction of Rs 75,000.

It takes the tax-free limit for non-salaried individuals to Rs 12,00,000, while for salaried individuals, it becomes Rs 12,75,000. 

What if income increases marginally?

What if the taxpayer's income increases by a few thousand rupees?

What does the rule say?

Here comes marginal relief for such taxpayers, which decreases their tax liability by a few notches.

What is marginal relief?

The marginal relief rule says that if the income of an individual increases by a small margin, they don't have to pay tax more than their incremental income. Let's see how this rule will work.

Tax on Rs 12,78,000 income

Here, we are taking the example of a salaried individual with a yearly income of Rs 12,78,000.

They will get a standard deduction of Rs 75,000, so their taxable income will be Rs 12,03,000.

If we keep the marginal relief benefit apart, the income tax on the entire amount as per slabs will be Rs 60,450 (excluding 4 per cent education cess).

But since the incremental income of Rs 3,000 is less than the tax liability of Rs 60,450, the tax on the individual will be Rs 3,000+ Rs 4 per cent of Rs 3,000 (Total Rs 3,120).

The same tax will be applicable to non-salaried individuals with Rs 12,03,000 income.