Marginal Relief Above ₹12 Lakh: How It Saves You Tax
Updated 4 October 20264 min read
Under the new regime, taxable income up to ₹12 lakh has nil tax thanks to a rebate of up to ₹60,000. Without any other rule, earning a little more would be a disaster: at ₹12,00,001, the slab tax is ₹60,000 and the rebate disappears. Marginal relief fixes that.
The rule
If your taxable income is above ₹12 lakh, your tax (before cess) cannot exceed the amount by which your income exceeds ₹12 lakh. So if you earn ₹25,000 more than ₹12 lakh, you pay at most ₹25,000 in tax, plus 4% cess.
Relief stops once the normal slab tax becomes lower than the excess income — at about ₹12.7 lakh of taxable income (roughly ₹13.45 lakh of salary after the ₹75,000 standard deduction).
Examples (salaried, new regime)
| Gross salary | Taxable income | Slab tax | Tax after relief | Total with cess |
|---|---|---|---|---|
| ₹12,75,000 | ₹12,00,000 | ₹60,000 | ₹0 | ₹0 |
| ₹12,80,000 | ₹12,05,000 | ₹60,750 | ₹5,000 | ₹5,200 |
| ₹13,00,000 | ₹12,25,000 | ₹63,750 | ₹25,000 | ₹26,000 |
| ₹13,25,000 | ₹12,50,000 | ₹67,500 | ₹50,000 | ₹52,000 |
| ₹13,45,000 | ₹12,70,000 | ₹70,500 | ₹70,000 | ₹72,800 |
| ₹13,50,000 | ₹12,75,000 | ₹71,250 | ₹71,250 | ₹74,100 |
What this means in practice
- Between ₹12 lakh and about ₹12.7 lakh of taxable income, almost every extra rupee you earn goes to tax. A raise in this band barely changes your take-home pay.
- Employer NPS contributions (80CCD(2)) reduce taxable income in the new regime. Restructuring part of your salary into employer NPS can bring you under ₹12 lakh.
- Many online calculators ignore marginal relief and overstate tax in this band. Our income tax calculator includes it.
Frequently asked questions
Is marginal relief available in the old regime?
No. In the old regime the ₹12,500 rebate simply stops above ₹5 lakh of taxable income.
Does my employer apply marginal relief in TDS?
It should, if you've chosen the new regime. If too much TDS was deducted, you'll get it back as a refund when you file.
This guide is for general education and is not investment, tax or legal advice. Rules and rates change; check the latest official sources or a qualified adviser before acting.