In recent times, many so-called “finfluencers” and “fraudcasters” have been spreading a misleading narrative about taxation. According to them, if your taxable income exceeds ₹12,00,000—even by ₹1—you will lose the rebate and suddenly have to pay ₹62,400+ in taxes. This claim sounds alarming, but it is entirely false.
The above myths emerged immediately after the Budget 2025 without proper interpretation. The summary of personal taxes slabs as per Budget 2025 can be read by clicking here.
Thankfully, the Income Tax Act provides for Marginal Relief, ensuring that an additional ₹1 in income does not create an unfair tax burden. Let’s break this down in simple terms.
The Finfluencer & Fraudcast Myth
They claim that if your income is ₹12,00,001, your tax liability will jump to ₹62,400+. The idea of suddenly losing the rebate sounds frightening and discouraging for taxpayers. However, this is a misinterpretation of tax laws and how rebates work under the new tax regime.
The Truth: Marginal Relief Applies
Under the new tax regime, taxpayers earning up to ₹12,00,000 get a rebate under Section 87A, effectively making their tax liability zero. But what happens if your income is ₹12,00,001?
Instead of immediately paying ₹62,400+ in tax, Marginal Relief ensures that you pay only ₹1 in tax!
Yes, you read that right! If your taxable income is just ₹1 above ₹12,00,000, you will not face a sudden, steep tax burden. Instead, the tax amount is adjusted in such a way that you only pay the additional tax corresponding to the extra income.
What Is the Maximum Income for Marginal Relief?
Marginal relief is available until your income reaches approximately ₹12,73,934.
- If your taxable income is between ₹12,00,001 and ₹12,73,934, marginal relief ensures you only pay tax on the excess amount above ₹12,00,000.
- Once your income exceeds ₹12,73,934, the tax liability surpasses the additional income over ₹12,00,000, and marginal relief no longer applies.
Key Takeaways
✅ Marginal Relief exists to prevent unfair tax jumps.
✅ If your taxable income is between ₹12,00,001 and ₹12,73,934, tax is adjusted fairly.
✅ You do NOT suddenly lose all benefits or pay ₹62,400+ in tax for earning ₹1 more.
✅ Don’t believe misleading financial myths—always check official tax laws!
Frequently Asked Questions (FAQs)
1. What is Marginal Relief?
Marginal Relief is a provision in the Income Tax Act that ensures taxpayers do not face a sudden jump in tax liability when their taxable income slightly exceeds ₹12,00,000 under the new tax regime.
2. How does Marginal Relief work?
If your taxable income exceeds ₹12,00,000 by a small margin, Marginal Relief ensures that you only pay tax on the excess amount instead of facing a sudden, steep tax liability.
3. Does Marginal Relief apply to all taxpayers?
Marginal Relief applies to taxpayers under the new tax regime whose taxable income is between ₹12,00,001 and ₹12,73,934.
4. What happens if my income exceeds ₹12,73,934?
If your taxable income crosses ₹12,73,934, your tax liability exceeds the additional income over ₹12,00,000, and Marginal Relief no longer applies.
5. Is it true that earning ₹1 more than ₹12,00,000 leads to ₹62,400+ in taxes?
No, this is a myth. Marginal Relief prevents such an unfair tax burden. If your income is ₹12,00,001, your actual tax liability is just ₹1, not ₹62,400+.
6. How can I ensure I am calculating my tax correctly?
It is always best to consult a qualified Chartered Accountant (CA) to understand your tax liability and Marginal Relief calculations accurately.
7. Where can I get more reliable tax information?
Always refer to official government resources or consult a professional CA instead of relying on misinformation spread by unverified sources online.
Final Thoughts
The idea that a ₹1 increase in taxable income can create a huge tax burden is a misconception spread by those who don’t understand taxation properly. Marginal relief is a critical feature in our tax system that ensures fairness and prevents sudden financial shocks. So, the next time someone tells you that earning slightly more will lead to a massive tax jump, you’ll know the truth!
For professional tax guidance, always consult a qualified Chartered Accountant (CA) instead of relying on misleading online advice!