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Why Crossing the Tax-Free Salary Limit Does Not Mean Losing All Your Income
Marginal tax relief ensures only income above the exemption limit is taxed, preventing taxpayers from losing their entire salary if earnings exceed the threshold slightly.
Many salaried taxpayers panic when their income exceeds the tax free threshold by even one rupee, assuming their entire salary will become taxable. Under India’s new income tax regime, this fear is misplaced. The system applies the principle of marginal tax relief, which ensures that tax is charged only on the portion of income exceeding the exemption limit, not the full salary. With a standard deduction of ₹75,000 available to salaried individuals, a gross income of ₹12.75 lakh effectively translates into a taxable income of ₹12 lakh, attracting zero tax.