What is Marginal Relief in Income Tax?

Marginal relief is a provision in the Income Tax system to reduce the impact of higher tax rates on individuals and companies with slightly higher incomes.

In India, the Income Tax system follows a progressive tax rate structure, which means that higher-income earners pay a higher percentage of their income as taxes. However, sometimes, due to a slight difference in the taxable income, a taxpayer may end up paying a significantly higher amount of tax due to the marginal increase in the income, which pushes them to a higher tax bracket.

In such cases, the marginal relief allows taxpayers to pay a lower tax rate on the excess amount above the tax threshold, which would have otherwise been taxed at a higher rate. The calculation of the relief is usually based on a formula that takes into account the difference in the tax liability with and without the marginal relief provision.

Overall, the Marginal Relief provision ensures that taxpayers are not unfairly burdened with higher taxes due to minor differences in their income levels.

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