Marginal Relief in the New Regime (FY 2026-27): The ₹12 Lakh Cliff Explained
Reviewed on June 28, 2026 • Author: Upaman Research Team • Reviewer: Tax Policy Review Desk
In the new regime for FY 2026-27, taxable income up to ₹12 lakh pays no tax thanks to the Section 87A rebate. The moment you go even ₹1 over, the rebate vanishes. Without a safeguard, someone at ₹12,00,100 taxable would owe roughly ₹60,000 in tax on ₹100 of extra income — absurd. Marginal relief is the rule that prevents exactly this.
The rule, in one sentence
Inside the relief band, your income tax (before cess) is capped at the amount by which your taxable income exceeds ₹12 lakh. Earn ₹25,000 over the line and your tax is ₹25,000 — not a rupee more. The extra income is effectively taxed at 100% at the very edge and then tapers, which sounds harsh but is far better than losing the whole rebate at once.
Where does the relief band end?
Marginal relief applies only while the normal slab tax is larger than the “excess over ₹12 lakh”. Solving for the point where they are equal gives a band of:
₹12,00,000 to ≈ ₹12,70,588 (taxable income)
Below ₹12 lakh: zero tax (rebate). Inside the band: tax equals the excess over ₹12 lakh. Above ≈ ₹12.71 lakh: ordinary slab tax, because by then the regular tax is the smaller number.
Worked table inside the relief band
| Taxable income | Excess over ₹12L | Tax after relief | Cess (4%) | Total |
|---|---|---|---|---|
| ₹12,10,000 | ₹10,000 | ₹10,000 | ₹400 | ₹10,400 |
| ₹12,25,000 | ₹25,000 | ₹25,000 | ₹1,000 | ₹26,000 |
| ₹12,50,000 | ₹50,000 | ₹50,000 | ₹2,000 | ₹52,000 |
| ₹12,70,000 | ₹70,000 | ₹70,000 | ₹2,800 | ₹72,800 |
Notice the “tax after relief” column simply mirrors the excess column — that is the whole mechanism. Once taxable income passes ≈ ₹12,70,588, the normal slab tax (which keeps rising at 15%) becomes the lower figure and relief stops mattering.
Don’t forget the ₹75,000 standard deduction
These figures are on taxable income. For salaried people, subtract the ₹75,000 standard deduction from salary first. So a ₹13 lakh salary becomes ₹12.25 lakh taxable, landing inside the relief band with ₹26,000 total tax. This is why the practical zero-tax salary ceiling is ₹12.75 lakh — covered in tax on a ₹12 lakh salary.
See it for your income
The Income Tax Calculator applies the rebate, marginal relief, and cess automatically and shows each step. For the full slab structure see the FY 2026-27 slabs guide; to decide between regimes use the breakeven guide.
The ≈ ₹12,70,588 boundary is derived from the FY 2026-27 slab rates and rounds slightly depending on how the department applies relief. This is general information, not tax advice. Confirm on the Income Tax Department portal.