Income Tax: Earning 13 Lakh but Taxable Amount Only Rs 25,000 – Complete Calculation Explained

Budget 2025 Tax Relief: Great news for salaried taxpayers! Individuals earning up to Rs 13.05 lakh annually will have minimal tax liability. Earlier, this exemption limit was Rs 12 lakh. Let’s break down how taxpayers can legally avoid tax on an annual salary of up to Rs 13.05 lakh.

Finance Minister Nirmala Sitharaman, in her Union Budget 2025 announcement, has brought major relief to taxpayers. Under the new tax provisions, income up to Rs 12 lakh is entirely tax-free. When considering the standard deduction, the exemption threshold rises to Rs 12.75 lakh. Furthermore, the concept of marginal relief ensures that individuals falling under a higher tax bracket will only pay tax on the excess income over the limit, currently set at Rs 30,000.

Earning More Than Rs 13 Lakh Yet Paying Lower Tax

Salaried individuals with an annual income of Rs 13.05 lakh benefit from deductions and reliefs. The breakdown includes a Rs 75,000 standard deduction and a marginal relief of Rs 30,000, effectively nullifying tax liability up to Rs 13.05 lakh.

Tax expert CA Abhishek Aneja explains that marginal relief is applied when an individual moves to a higher tax bracket, ensuring that the additional tax burden is minimized. With the Rs 12 lakh income exemption in place, adding a Rs 75,000 standard deduction increases the total exemption to Rs 12.75 lakh. Further including the Rs 30,000 marginal relief extends the total tax-free income to Rs 13.05 lakh.

Revised Taxation – Savings for Different Income Levels

Here’s a comparison of tax reductions under the new tax regime:

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  Rs 12 lakh salary – No tax (Previously Rs 80,000 tax liability)

  
  


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  Rs 13.05 lakh salary – No tax (Previously Rs 80,000 tax liability)

  
  


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  Rs 16 lakh salary – Tax reduced to Rs 1.20 lakh (Previously Rs 1.70 lakh, saving Rs 50,000)

  
  


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  Rs 18 lakh salary – Tax reduced to Rs 1.60 lakh (Previously Rs 2.30 lakh, saving Rs 70,000)

  
  


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  Rs 20 lakh salary – Tax reduced to Rs 2 lakh (Previously Rs 2.90 lakh, saving Rs 90,000)

  
  


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  Rs 24 lakh salary – Tax reduced to Rs 3 lakh (Previously Rs 4.10 lakh, saving Rs 1.10 lakh)

  
  


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  Rs 50 lakh salary – Tax reduced to Rs 10.80 lakh (Previously Rs 11.90 lakh, saving Rs 1.10 lakh)

  
  

Updated Income Tax Slabs for FY 2025-26

This significant tax relaxation is a welcome move for salaried individuals, reducing their financial burden and promoting savings.