Explore the concept of Marginal Relief under the New Tax Regime from FY 2023-24 onwards. Section 115BAC allows taxpayers the option to choose between lower tax rates with certain exemptions and deductions forfeited or continue paying taxes at existing rates. The income tax slab rates for FY 2022-23 and the list of exemptions and deductions not allowed under the new regime are provided.
Section 115BAC: In this new regime, taxpayers have the OPTION to choose either:
1. To pay income tax at lower rates as per the New Tax regime on the condition that they forgo certain permissible exemptions and deductions available under income tax, Or
2. To continue to pay taxes under the existing tax rates. The assessee can avail of rebates and exemptions by staying in the old regime and paying tax at the existing higher rate.
Income tax slab rate FY 2022-23 (AY 2023-24) – Applicable for New Tax regime:
| Slab | New Tax RegimeBefore Budget 2023(until 31st March 2023) | New Tax RegimeAfter Budget 2023(From 1st April 2023) |
| ₹0 – ₹2,50,000 | – | – |
| ₹2,50,000 – ₹3,00,000 | 5% | – |
| ₹3,00,000 – ₹5,00,000 | 5% | 5% |
| ₹5,00,000 – ₹6,00,000 | 10% | 5% |
| ₹6,00,000 – ₹7,50,000 | 10% | 10% |
| ₹7,50,000 – ₹9,00,000 | 15% | 10% |
| ₹9,00,000 – ₹10,00,000 | 15% | 15% |
| ₹10,00,000 – ₹12,00,000 | 20% | 15% |
| ₹12,00,000 – ₹12,50,000 | 20% | 20% |
| ₹12,50,000 – ₹15,00,000 | 25% | 20% |
| ₹>₹15,00,000 | 30% | 30% |
List of common Exemptions and deductions “ not allowed” under the New Tax rate regime (From FY 23-24):
1. Leave Travel Allowance (LTA)
2. House Rent Allowance (HRA)
3. Conveyance allowance
4. Daily expenses in the course of employment
5. Relocation allowance
6. Helper allowance
7. Children education allowance
8. Other special allowances [Section 10(14)]
9. Professional tax
10. Interest on housing loan (Section 24)
11. Deduction under Chapter VI-A deduction (80C,80D, 80E and so on) (Except Section 80CCD(2))
List of deductions “allowed” under the new Tax rate regime:
1. Standard deduction on salary
2. Transport allowance for specially-abled people
3. Conveyance allowance for expenditure incurred for travelling to work
4. Investment in Notified Pension Scheme under section 80CCD(2)
5. Deduction for employment of new employees under section 80JJAA
6. Depreciation u/s 32 of the Income-tax act except for additional depreciation.
7. Any allowance for travelling for employment or on transfer.
Let’s understand with the help of an example in the case of Mr X:
Case I:
Gross Total Income = 7,55,000
Standard Deduction = 50,000
Net Total Income = 7,05,000
Tax on Net Income = 25,500
Here, since income increased by Rs 5,000 only, the tax on income increased by Rs 25,500.
So, Marginal Relief shall be available to Mr X = Rs 25,500 – Rs 5,000 = Rs 20,500
Net Tax Payable = Rs 5,000
Case II:
Gross Total Income = 7,77,777
Standard Deduction = 50,000
Net Total Income = 7,27,777
Tax on Net Income = 27,777
Here, since income increased by Rs 27,777
Also, the tax on income increased by Rs 27,777.
So, Marginal Relief shall be available to Mr X = Rs 27,777 – Rs 27,777 = Rs Nil
Net Tax Payable = Rs 27,777.
In case of further clarification, please contact at 7037999666 or mail at pcakg1989@gmail.com
Author Bio
I have one query like I file return under ITR -4 presumptive tax and my gross income is say Rs 1450000 so I Show my income as say 725010 (50 % deduction allowed) so if my net income is Rs 725010. from which column under the ITR 4 I can claim deduction of Rs50000 STD Deduction or may i show my income net as 725010-50000 std deduction Please advise. Atambir 9915012207
Case I:
Gross Total Income = 7,65,000 Standard Deduction = 50,000 Net Total Income = 7,15,000 Tax on Net Income = 26,500
Marginal Relief ?
Case II:
Gross Total Income = 7,70,000 Standard Deduction = 50,000 Net Total Income = 7,20,000 Tax on Net Income = 27,000
Marginal Relief ?
How come? The income increase of Rs 5000/- have to pay Rs5000/-tax and increase of Rs 27700/- do not have any tax liability
Ravinder Ji,
In the first case, if Income increased by Rs 5000 then Marginal relief will be available for the amount in excess of Rs 5000 and Rs 5000 would be tax payable.
But in the second case, the income increased by Rs 27777 and also tax is Rs 27777, so no tax relief and the full amount would be payable. Since you earned the full amount of tax payable in excess of Rs 700000 exemption.
This is just like relief under surcharge slabs.
dear Sir,
is there any calculation error in following? as it shows 7,55,000/ – 50,000/- as 7,50,000/. please look into the matter.
Gross Total Income = 7,55,000 Standard Deduction = 50,000 Net Total Income = 7,50,000
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Yes, here a mathematical error. Net income should be 705000, by mistake amount written here. But tax calculated is correct.
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