The Union Budget 2025, unveiled by Finance Minister Nirmala Sitharaman, has brought significant tax reforms aimed at reducing the financial burden on the middle class and promoting economic growth. With a zero-tax liability for individuals earning up to Rs 12 lakh and the introduction of marginal tax relief, this budget promises a transformative impact on taxpayers. Let’s explore the key changes and what they mean for you.
What is the Union Budget 2025?
The Union Budget is the government’s annual financial blueprint outlining expenditure, revenue projections, and policy changes. The 2025 budget prioritizes tax reforms, economic development, and welfare schemes for the middle class and businesses.
Earning up to Rs 12 lakh? Here’s How the New Marginal Tax Relief Benefits You
In a significant move, individuals earning up to Rs 12 lakh per year are now exempt from income tax. For those earning slightly above this limit, marginal tax relief ensures they are not disproportionately taxed.
What is Marginal Tax Relief?
Marginal tax relief prevents a sharp increase in tax liability for individuals whose income slightly exceeds the exemption threshold. It ensures that the additional tax payable does not surpass the extra income earned.
How Does Marginal Tax Relief Work?
Suppose you earn Rs 12.10 lakh annually. Without marginal relief, your tax liability would be Rs 61,500. However, with marginal relief, your tax dues are capped at Rs 10,000, keeping your post-tax income close to that of someone earning exactly Rs 12 lakh.
Eligibility for Marginal Tax Relief
Marginal tax relief applies to individuals earning slightly above Rs 12 lakh, typically up to Rs 12.75 lakh. Beyond this range, standard tax slabs apply.
Who Benefits from Marginal Tax Relief?
- Salaried individuals
- Small business owners
- Professionals with marginally higher incomes
Revised Tax Slabs in Union Budget 2025
The updated tax slabs under the new regime are as follows:
Income Range (Rs) | Tax Rate (%) |
---|---|
0-4 lakh | Nil |
4-8 lakh | 5% |
8-12 lakh | 10% |
12-16 lakh | 15% |
16-20 lakh | 20% |
20-24 lakh | 25% |
Above 24 lakh | 30% |
Comparing Rebates and Marginal Relief
To clear the confusion, here’s a quick comparison:
Feature | Rebate | Marginal Relief |
Purpose | Full tax exemption | Partial tax relief |
Eligibility | Income up to Rs 12 lakh | Income slightly above Rs 12 lakh |
Benefit | No tax liability | Capped tax liability |
How the Changes Impact Taxpayers?
The tax reforms benefit a wide range of taxpayers, from salaried individuals to small business owners. Increased disposable income is expected to boost consumption and savings.
Exclusions from Marginal Relief
Marginal relief does not apply to:
- Capital gains income
- Lottery winnings
- Special-rate earnings
Expert Opinions on the Union Budget 2025
Financial analysts have largely welcomed the budget. Manmeet Kaur, Partner at Karanjawala & Co, remarked, “The higher tax-free slab and increased standard deduction are timely measures to support the middle class and stimulate the economy.”
How to Calculate Your Tax Liability?
Here’s a simple guide:
- Calculate your total annual income.
- Apply the relevant tax slab rates.
- Check eligibility for rebates or marginal relief.
- Compute your final tax liability.
Example Calculation
- Income: Rs 12.10 lakh
- Tax without marginal relief: Rs 61,500
- Tax with marginal relief: Rs 10,000
Comparison Between Old and New Tax Regimes
Feature | Old Regime | New Regime |
Minimum Tax-Free Slab | Rs 2.5 lakh | Rs 12 lakh |
Standard Deduction | Rs 50,000 | Rs 75,000 |
Rebate | Limited | Comprehensive |
Marginal Relief | Not Applicable | Applicable |
FAQs
1. What is the tax exemption limit under the Union Budget 2025?
The tax exemption limit is Rs 12 lakh under the new regime.
2. Who qualifies for marginal tax relief?
Individuals earning slightly above Rs 12 lakh, up to approximately Rs 12.75 lakh, qualify for marginal relief.
3. What happens if my income exceeds Rs 12.75 lakh?
Standard tax slabs apply, and marginal relief is no longer available.
4. Are capital gains eligible for marginal relief?
No, marginal relief applies strictly to standard income taxed under Section 115BAC.
5. How does marginal relief benefit taxpayers?
It ensures that a small increase in income doesn’t lead to a disproportionately higher tax liability.
6. Is the new tax regime mandatory?
No, taxpayers can choose between the old and new regimes.
Conclusion
The Union Budget 2025 marks a turning point for tax reforms in India. With higher tax-free slabs and the introduction of marginal relief, taxpayers can enjoy increased disposable income, fostering savings and consumption. Understanding these changes is essential for optimizing your financial planning and tax benefits.
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