Tax
Rebate under 87A
Quick answer
A resident-individual tax rebate: up to ₹60,000 against ordinary new-regime slab tax when total income is at most ₹12 lakh in FY 2025-26.
Section 87A reduces the final tax bill for resident individuals below a set taxable-income limit. It is a rebate after tax is calculated, not a deduction from income.
For FY 2025-26 (AY 2026-27), the new regime gives up to ₹60,000 of rebate when a resident individual's total income is at most ₹12 lakh. That is about ₹12.75 lakh gross salary after the ₹75,000 standard deduction only when salary is the person's sole income.
Special-rate income, such as many capital gains, still counts in total income for the ₹12 lakh test, but the tax on it cannot be offset by this rebate. For ordinary slab-rate income just above ₹12 lakh, marginal relief limits the sudden tax jump.
For example
With ₹12 lakh of ordinary slab-rate total income and no special-rate income, new-regime tax is ₹60,000 and the rebate can reduce it to zero. At ₹12.10 lakh of ordinary slab-rate income, marginal relief can limit income tax to roughly the ₹10,000 above the cutoff, before cess.
Common questions
- What is the Section 87A rebate limit for FY 2025-26?
- In the new regime, a resident individual whose total income is at most ₹12 lakh can claim up to ₹60,000 against ordinary slab-rate tax. In the old regime, the limit remains ₹12,500 when total income is at most ₹5 lakh.
- Is a ₹12.75 lakh salary tax-free in the new regime?
- It can be if salary is your only income: the ₹75,000 standard deduction reduces ₹12.75 lakh gross salary to ₹12 lakh total income. Other income can push total income over the threshold, and tax on special-rate income is not rebated.
- Do I lose the full rebate if income crosses ₹12 lakh?
- The rebate ends above ₹12 lakh, but marginal relief limits the initial jump for ordinary slab-rate income. Near the cutoff, that income tax before cess cannot exceed the amount by which total income is above ₹12 lakh.
- Can capital gains use the new-regime Section 87A rebate?
- No for capital gains taxed at special rates in FY 2025-26. Those gains still count in total income for the ₹12 lakh eligibility threshold, but their tax cannot be offset by the new-regime rebate. Split ordinary and special-rate income before estimating tax.