With the budget for the 2025-26 annual year, middle-class people are in huge relief.
The bold move of no-tax till 12 lacks has shown a promising financial year ahead. With the new tax slab, a lot of things have been changed and common people like you and me might be thinking “Can Rs 12 lakh tax-free income can reshape the economy of India?”.
Amidst global recession and job layoffs, it has become crucial to understand the concept of no tax till twelve lakhs, whether it is an excellent move or another vague move to gain votes. In this blog, we will be understanding the A to Z of this tax relief.
New Tax Slab 2025- What Does it Say
The annual budget 2025-26 comes up with a revised tax slab, where we can see hope and some relief for middle-class people. When we compare the tax slab from last year’s budget 2024-25, we can see significant changes in the tax rate for every income.
Apart from no tax till 12 lakhs, the government has also decreased taxes on income of more than 12 lakhs. In 2024-24, where the tax rate for Rs 12,00,001 to Rs 15,00,000 was 20%, in this budget it has been reduced to 15%, and tax rates for above Rs 15,00,000 was 30%, it has been revised in 2025-26 budget and brought down to 20%.
| Income Tax Slabs | Tax Rate |
| Upto Rs. 4,00,000 | 0% |
| From Rs 4,00,001 To Rs 8,00,000 | 5% |
| From Rs 8,00,001 To Rs 12,00,000 | 10% |
| From Rs 12,00,001 To Rs 16,00,000 | 15% |
| From Rs 16,00,001- Rs 20,00,000 | 20% |
| From Rs 20,00,000 To Rs 24,00,000 | 25% |
| Above Rs 24,00,000 | 30% |
So, the tax slab for the budget 2025-26, looks promising, with decreased tax rates, we can see some relief for middle-class people. It can be found game changer, if implemented well.
What If Your Income Marginally Exceeds 12 Lakhs?
Suppose you are in a situation where your income slightly increases by more than 12 lakhs, what do you do? Let’s understand it with an example,
Your income: 12,50,000.
Tax Rate Applied: 67500
Now, in this case, you have to pay a whole sum of 67,500. However, according to the Marginal Relief Act, the government states that if your income is slightly higher than the 12 lakhs tax bracket, then you can avail the benefit of the Marginal Act.
Let’s understand through a table:
| Income | Tax without Marginal relief (Rs.) | Tax actually payable with marginal relief (Rs.) |
| Rs 12,10,000 | 61,500 | 10,000 |
| Rs 12,50,000 | 67,500 | 50,000 |
| Rs 12,70,000 | 70,500 | 70,000 |
| Rs 12,75,000 | 71,250 | 71,250 ( No marginal relief) |
So according to the table, if a person is earning slightly above 12,00,000 then he may not need to pay the whole tax but can follow the marginal act.
So, if we follow the marginal act,
Then instead of paying 67,500, we can pay the tax amount of 50,000.
Note: If you are a salaried person then, due to standard deduction you do not have to pay tax to the amount of 12,75,000. In that case, the marginal acts will not be applied or will be applied differently.
Impact of This No Tax Till 12 Lakhs Income
No, as we know from this financial year, there will be no tax till 12 lakhs, helping middle people to save up to Rs 60,000. Then what are the benefits that we can avail from this? Here are several benefits that we can avail:
- Higher Disposable Income
With less amount being spent as tax, now people will be able to spend more on their personal expenses, which will indeed increase the spending, and the government will be able to collect more tax through GSTs.
- Investment in Different Asset Class
The money saved can be spent on investments in various asset classes such as mutual funds, stocks, bonds, etc. It will indeed give a boost to the investment market but it is important to keep in mind that the government has not revised the tax rate for gains i.e. STCG (Short term capital gain) and LTCG (Long term capital gains).
- Investment in Properties
This can be a good opportunity for common people to build wealth. Common people will get ample of opportunity to invest in properties or real estate. Mind the tax rate before investing in it.
Conclusion
So, what do we get, whether it is a game changer or not? Talking about the relief, from the last budget, this budget has provided you the relief but the thing that is more important to take care of is that the government has only made major changes in the tax slab rate, other than that no changes have been made which cn bring a huge impact.
Now it is up to you which slabs you will be following. But even after that if you are stuck you can take the help of financial advisors like Divadhvik. The professionals and advisors are always there to help you and make the tax-paying process easy and hassle-free.
