Every budget brings excitment, confusion and plenty of bold claims! WhatsApp groups are buzzing, and social media is flooded with posts claiming “No tax up to ₹12 lakh!” Sounds amazing, right?
But does that mean if you earn ₹15 lakh, you only pay tax on ₹3 lakh? 🤔 Or if your salary is ₹12.10 lakh, do you suddenly owe ₹61,500 in taxes while someone earning ₹12 lakh pays nothing? 😲 And is the ₹75,000 standard deduction applicable to everyone?
Let’s break it down.
1️⃣ The ₹15 Lakh Tax Myth: Time to Celebrate?
Imagine this: You earn ₹15 lakh and think, “Since ₹12 lakh is tax-free, I’ll only pay tax on ₹3 lakh at 15%—that’s just ₹45,000! Time for a splurge! I can finally buy that 85-inch 4K TV… or maybe take that long-awaited vacation!”
Sounds too good to be true? That’s because it is. 😅
Here’s the reality:
✅ The ₹12 lakh limit applies only for tax rebate under Section 87A.
✅ If your taxable income exceeds ₹12 lakh, you don’t get the ₹60,000 rebate.
✅ Instead, your tax is calculated based on slabs, meaning your entire taxable income is taxed accordingly.
For example, someone earning ₹15 lakh (after deductions) will fall into the applicable tax slabs and end up paying around ₹1.05 lakh in taxes instead of the ₹45,000 they imagined. A tax saving of ₹40,000—not the ₹1.10 lakh saving they were hoping for!
2️⃣ The ₹12 Lakh vs. ₹12.50 Lakh Paradox: A Salary Rivalry
Raj: “I just got a job offer for ₹12.10 lakh! Looks like I’m moving ahead in life!” What about you, Sameer? Have you even got a job? 😏
Sameer: “Hah! I’m earning ₹12 lakh, but I bet I take home more than you! I always knew I was smarter than you.” 🤨
Raj: “What nonsense! I make more, I should get more. That’s how salaries work… right?”
Well… not always. 😬 Here’s how the numbers play out:
✅ Sameer earns ₹12 lakh
- Since his taxable income does not exceed ₹12 lakh, he qualifies for the ₹60,000 rebate.
- Final tax? ₹0! 🎉
✅ Raj earns ₹12.10 lakh
- His taxable income is above ₹12 lakh.
- Final tax? ₹61,500! 😨
Raj is thinking, “This is unfair! I’m earning only ₹10,000 more than Sameer, but I’ll have to pay higher taxes and take home less than him.”
Does that seem fair? Not really. That’s where marginal relief comes in.
3️⃣ Marginal Relief: Fixing the Tax Shock
The government ensures fairness with marginal relief, so that someone earning just above ₹12 lakh doesn’t suddenly pay a massive amount in taxes.
How does Marginal Relief work?
✅ If your income is ₹12.10 lakh, the tax without relief would be ₹61,750. ✅ But marginal relief ensures that you only pay tax equal to the amount by which your income exceeds ₹12 lakh (₹10,000 in this case). ✅ So, instead of paying ₹61,750, you only pay ₹10,000!
Marginal Relief in Action:
| Income (₹) | Tax Without Relief (₹) | Tax Payable After Marginal Relief (₹) |
|---|---|---|
| 12,10,000 | 61,500 | 10,000 |
| 12,50,000 | 67,500 | 50,000 |
| 12,70,000 | 70,500 | 70,000 |
| 12,75,000 | 71,250 | 71,250 (No relief) |
Moral of the story? Marginal relief ensures fairness and prevents sudden tax shocks. 😊
4️⃣ Standard Deduction: Who Gets It?
Finally, let’s clear the last bit of confusion:
✅ Standard Deduction (₹75,000): Available only for salaried individuals. It reduces taxable income before tax calculations. If you’re salaried, you get this benefit—no matter how high your salary is. ✅ Tax Rebate under Section 87A (₹60,000): Only applies if your total taxable income (after deductions) does not exceed ₹12 lakh.
Final Takeaways
✅ Earning ₹15 lakh? You’re taxed on the full amount, not just ₹3 lakh. ✅ Marginal relief prevents unfair tax jumps if you’re just above ₹12 lakh. ✅ Standard deduction of ₹75,000 applies only to salaried individuals.
This budget brings major benefits, but understanding the nuances ensures you make smart financial decisions. Hope this clears up the confusion! Let me know if you have any questions. 👇
