Marginal Relief Benefit on Income Tax Rebate u/s 87A [Budget 2025]

Budget 2025 has announced no Income Tax on Income up to Rs. 12 Lakhs. The Tax Slabs are as follows:

As per these slabs, Income of up to Rs. 400,000 is non Taxable. So how can we say that we have no Income Tax on Income up to Rs. 12 Lakhs? This is due to the Income Tax Rebate.

What is an Income Tax Rebate?

Resident Individuals are also eligible for a Rebate of up to 100% of income tax subject to a maximum limit depending on tax regimes as under:

Old Tax Regime: Tax rebate up to Rs. 12,500 is applicable for resident individuals if the total income does not exceed Rs 5,00,000.

New Tax Regime: Tax rebate up to Rs. 60,000 is applicable for resident individuals if the total income does not exceed Rs 12,00,000.

No Rebate is available for Non-Resident Indians (NRIs).

What is Marginal Relief Benefit on Income Tax Rebate u/s 87A?

Let us understand this with the below mentioned example:

The income of Mr. A is Rs. 1200000. His Tax Liability will be Zero as he is eligible for a Tax Rebate of Rs. 60,000.

The income of Mr. B is Rs. 1210000. His Tax Liability will be Rs. 61500 as he is not eligible for a Tax Rebate.

In Above, Increase in Income is Rs. 10000, but increase in tax is Rs. 61500. Thus increase in income is more than increase in Tax.

Thus Mr. B is eligible for Marginal Relief of Rs. 10000. His Final Tax Liability will be Rs. 10400.

Analysis for Marginal Relief Benefit on Income Tax Rebate u/s 87A is given below.