Marginal Relief Cuts Income Tax Liability by Rs 30,250 for Rs 13.1 Lakh Salary
New Tax Regime for Resident Salaried Individuals
Overview
The new tax regime offers lower tax rates but with reduced exemptions and deductions. Key features of the new tax regime include:
- Tax rebate of up to Rs 60,000 under Section 87A for resident individuals with total normal income not exceeding Rs 12 lakh.
- Higher standard deduction of up to Rs 75,000 for salaried individuals opting for the new tax regime, compared to Rs 50,000 for those opting for the old tax regime.
- Marginal relief for individuals with income exceeding Rs 12 lakh, limiting the final tax payable to the amount by which total income exceeds Rs 12 lakh.
Tax Calculation Example
For a resident individual with a salary income of Rs 13.10 lakh, the taxable salary is Rs 12.35 lakh after deducting a standard deduction of Rs 75,000. Since the total income exceeds the threshold of Rs 12 lakh, the rebate under Section 87A is not available.
The tax payable on Rs 12.35 lakh as per the slab rate is Rs 65,250. However, due to the availability of marginal relief, the tax payable is limited to Rs 35,000 (the amount by which the income exceeds Rs 12 lakh). A 4% cess will be applied to the final tax liability.
Investor Takeaway
Individuals may benefit from the new tax regime with lower tax rates and higher standard deductions.
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