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What is the Tax Rebate Under Section 87A of Income Tax Act?

What are the Changes in Tax Rebate Under Budget 2025?

What Are the Eligibility Criteria to Avail Tax Rebate Under Section 87A?

Tax Liabilities Against Which Individuals Can Claim Rebate Under Section 87A

Steps to Claim Tax Rebate Under Section 87A

How to Calculate Tax Rebate Under Section 87A of the ITA?

To streamline this process of claiming rebate under Section 87A, take a look at a simple example:

Particulars Old Tax Regime New Tax Regime
Gross Total Income  ₹7,00,000  ₹12,75,000 
Standard Deductions  ₹50,000  ₹75,000 
Section 80C Deductions  ₹1,50,000  -- 
Total Taxable Income  ₹5,00,000  ₹12,00,000 
Income Tax Payable  ₹12,500  ₹60,000 
Section 87A Rebate ₹12,500 ₹60,000
Tax Payable (without cess)  NIL  NIL 

*Besides 80C, individuals can also claim deduction under Section 80D against investing in medical insurance and under Section 80CCD when investing in NPS. At the same time, they can also enjoy tax deductions under Section 80G against eligible donations along with other deductions. 

What is Marginal Relief on Rebate?

If the income of an individual exceeds ₹12 lakh by a small margin and tax payable on such income is exceeding this income limit, then as per the benefit of marginal relief under Section 87A, taxpayers whose income exceeds ₹12 lakh do not have to pay significantly more tax.

Marginal relief is applicable to incomes up to ₹12.75 lakh, after which normal tax rates apply, as per the IT slabs. Here’s how:

Total Income (₹) Tax Without Marginal Relief (₹) Tax With Marginal Relief (₹)
₹12,00,000 ₹60,000 ₹0
₹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

What is the Maximum Tax Rebate Limit from FY 2020-21 to FY 2025-26?

Take a look at the following table illustrating the maximum income tax rebate limit under Section 87A for new income tax regime, along with the net taxable income in each financial year:

Note that the rebate under the old tax regime is the same for the given financial years, i.e. ₹12,500 for an income up to ₹5,00,000.

Financial Year Net Taxable Income Tax Rebate Limit under Section 87A for New Tax Regime
2025-2026  ₹12,00,000  ₹60,000 
2024-2025  ₹7,00,000  ₹25,000 
2023-2024  ₹7,00,000  ₹25,000 
2022-2023  ₹5,00,000  ₹12,500 
2021-2022  ₹5,00,000  ₹12,500 
2020-2021  ₹5,00,000  ₹12,500 

Thus, going through these pointers mentioned above will simplify the process of availing a tax rebate under Section 87A and reduce the tax burden.

Considerations Before Rebate Under Section 87A

FAQs about Rebate Under Section 87A