What is Section 87A Tax Rebate?
taxDefinition
Section 87A of the Income Tax Act provides a full tax rebate to individual taxpayers whose net taxable income does not exceed ₹5 lakh (old regime) or ₹7 lakh (new regime). This means if your taxable income falls within these limits, your final income tax liability becomes zero — even if your income falls in a taxable slab.
Detailed Explanation
Section 87A was introduced in Finance Act 2013 to provide tax relief to low and middle-income earners. Under the new tax regime (default from FY 2024-25), the rebate limit was increased to ₹7 lakh, making the new regime effectively tax-free for anyone earning up to ₹7.75 lakh (₹7L taxable + ₹75,000 standard deduction).
The rebate under 87A is: up to ₹12,500 for old regime (income ≤ ₹5L), and up to ₹25,000 for new regime (income ≤ ₹7L). If your calculated tax is ₹15,000 and you qualify for the rebate, your tax payable becomes zero.
Note: Section 87A does not apply to special-rate income like long-term capital gains (LTCG) on equity exceeding ₹1 lakh, which are taxed at a flat 10%.
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