Mon Feb 03 14:01:42 UTC 2025: ## Budget 2025: Tax-Free Income Threshold Raised to ₹12 Lakh, Marginal Relief Introduced

**NEW DELHI** – The Union Budget 2025 significantly altered income tax calculations, raising the tax exemption threshold to ₹12 lakh. This effectively makes incomes up to this amount tax-free for most individuals. Salaried individuals benefit further, with the threshold reaching ₹12.75 lakh after considering the standard deduction of ₹75,000 under the new tax regime. This is facilitated by revised tax slabs and a boosted ₹60,000 rebate under Section 87A.

However, the impact on those earning slightly above ₹12 lakh has sparked debate online. To address this, a new “marginal relief” provision has been introduced. This mechanism ensures that taxpayers with incomes just above the ₹12 lakh threshold don’t face disproportionately high tax rates.

For instance, a non-salaried individual earning ₹12.1 lakh would typically owe ₹61,500 in taxes. With marginal relief, this is reduced to ₹10,000. This relief applies to incomes between ₹12 lakh and ₹12.75 lakh. Beyond ₹12.75 lakh, standard tax rates apply.

The government provides examples: an individual earning ₹12.1 lakh pays ₹10,000 (with marginal relief), while someone earning ₹12.5 lakh pays ₹50,000. At ₹12.7 lakh, the tax is ₹70,000, rising to ₹71,250 at ₹12.75 lakh (where marginal relief ceases).

The government projects a ₹1 lakh crore tax saving from these changes, boosting disposable income and offering increased financial flexibility for taxpayers. It’s crucial to note that special rate incomes, such as capital gains, are not covered by the Section 87A rebate. While incomes up to ₹12 lakh are generally tax-free under the new regime, exceptions exist for those with specific income types.

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