Marginal Relief for assesses under the New Scheme for income between Rs.7 Lakhs and Rs.7.25 Lakhs [Sec 87A of ITA'61 - Sec 156 of ITA'25]

It has been proposed to provide marginal relief for taxpayers adopting new tax regime and having income exceeding Rs 7.00 lakhs. It had proposed to insert a proviso to Section 87A to allow a higher rebate to the resident individual opting for the new tax scheme under Section 115BAC(1A). Hence, it was proposed that there would be no requirement to pay tax under the new regime in case the income does not exceed 7 lakh. This was done vide the rebate route u/s 87A, wherein after the initial threshold exemption the balance income uptill Rs.7 Lakhs would be under rebate. However, there was no marginal relief prescribed with the implication that the once the income exceeds Rs. 7 lakh (say Rs. 7.05 lakh), the requirement to pay tax would have triggered and the same could have resulted in the person falling within the income range of 7,00,001 to 7,29,000 to be worse of than the person having income of Rs. 7 lakh. To remove this anomaly, marginal relief has now been proposed to be prescribed which would mean that the tax payable shall not exceed the income exceeding Rs. 7 lakh. This would bring such individuals falling within the income range of 7,00,001 to 7,29,000 at par with the person having income of Rs. 7 lakh. Therefore, to calculate the tax payable above Rs.7 Lakhs, one would be required to calculate tax payable on total income before rebate under Section 87A (Say A); then Calculate the difference between total income and Rs. 7,00,000 (Say B); Incase (A-B) is positive, the difference will be the rebate allowed under Section 87A. However, if the figure is negative, then no rebate shall be allowed under Section 87A