Marginal relief — when a tiny extra income triggers a big tax jump

✍️ EaseValue Advisors · Updated 17 Jul 2026 · FY 2025-26

In short

Cross a threshold by a little and the extra tax can exceed the extra income — marginal relief caps it. It applies at the ₹12 lakh rebate line (new regime) and at every surcharge threshold.

At the ₹12 lakh rebate line (new regime)

Just above ₹12 lakh you'd lose the whole 87A rebate — marginal relief limits your tax to roughly the amount by which income exceeds ₹12 lakh, so a small overshoot doesn't cost a fortune.

At surcharge thresholds

Near ₹50 lakh, ₹1 crore, ₹2 crore, surcharge kicks in on the whole income — marginal relief caps the extra tax+surcharge to the extra income above the threshold.

It's built into a correct computation — but worth checking, and worth timing income around these lines.

The law behind it

Section 87A Finance Act — surcharge

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General information for FY 2025-26 (AY 2026-27), not advice on your specific case. Limits, rates and conditions change with each Finance Act and depend on your facts — confirm before acting. © EaseValue Advisors LLP.

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