Union Budget 2025 has sparked concerns among some taxpayers, particularly those earning slightly above ₹12 lakh per year. For instance, a person with an income of ₹12,06,000 faces tax worries due to the progressive tax slabs. According to the slabs, Mr. X would owe ₹63,336 in tax. However, the Marginal Relief provision in the Income Tax Act, 1961, provides a solution. This provision ensures that a taxpayer pays the lower of either the differential income or the tax payable. In Mr. X’s case, the differential income is ₹6,000, which results in a tax of ₹6,240 after including the education cess. Thus, instead of paying ₹63,336, Mr. X only needs to pay ₹6,240, significantly reducing the tax burden despite earning just slightly over ₹12 lakh. This provision helps mitigate the concern of paying disproportionately higher taxes for small increases in income.
Announcement of Union Budget 2025 made some taxpayers worried……
Let’s understand the reason of worriedness & its solution!!!!!!
The main reason of happiness is there is no income tax to be paid if a person is earning up to 12 lacs per annum.
But the question is why some of the taxpayers got worried!!!!!
Let’s understand with the help of an example:
A person X whose annual income is Rs.12,06,000/-
As per the provisions, there is no tax payable if the annual income is up to 12 lacs & Mr. X has an annual income more than 12 lacs…. This makes a sense of worriedness
So, let’s discuss the Mr. X’s situation-
As per the slabs announced, let’s calculate tax payable by Mr. X because of earning more than 12 lacs in a year…
| Tax Slabs | Rate | Tax |
| 0-400000 | 0% | 0 |
| 400001-800000 | 5% | 20000 |
| 800001-1200000 | 10% | 40000 |
| 1200001-1600000 | 15% | 900 |
| Tax payable | 60900 | |
| Education Cess | 4% | 2436 |
| Total Tax to be paid | 63336 |
Now, the situation of Mr. X is not good because he is of the view that he has to pay tax of Rs. 63336 only because of earning Rs.6000 extra…
Now discuss his situation with the help of applicable provisions:
As per the provisions of Marginal Relief of Income tax Act 1961 it states that the taxpayer has to pay lower of differential income earned or tax to be payable.
So using this equation:
Mr X has to pay lower of:
A) Tax payable: 60900+4% cess(2436)=63336
B) Differential Income : 1206000-1200000= 6000+4% cess(240)=6240
So by grace of the provisions of Marginal Relief Mr X has to pay 6240 only instead of 63336
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