Section 87A provides a tax rebate for resident individuals, making income entirely tax-free up to a certain limit. For FY 2025-26 (AY 2026-27), the new tax regime offers a rebate up to ₹60,000 for taxable income up to ₹12 lakh. Under the old regime, the rebate is ₹12,500 for incomes up to ₹5 lakh.
Key Features of Section 87A (FY 2025-26)
Eligibility: Must be a resident individual.
- New Tax Regime (FY 25-26): Taxable income up to ₹12 lakh earns a rebate of ₹60,000. Technically, due to marginal relief, this can benefit incomes up to ₹12,70,500.
- Old Tax Regime: Taxable income up to ₹5 lakh qualifies for a rebate of ₹12,500.
- Tax Impact: If eligible, your net tax payable becomes zero.
- Special Income Exception: The rebate under the new regime is not applicable to income taxed at special rates (e.g., long-term capital gains, short-term capital gains from equity).
Key Differences in Rebate
| Feature | New Regime (FY 2025-26) | Old Regime |
|---|---|---|
| Max Income Limit | Up to ₹12 Lakh | Up to ₹5 Lakh |
| Max Rebate Amount | ₹60,000 | ₹12,500 |
| Applicability | Resident Individuals | Resident Individuals |
Important Notes
- Marginal Relief: If your income slightly exceeds ₹12 lakh, marginal relief is available to cap your tax liability.
- Deductions: Under the new regime, the ₹12 lakh limit is applied after standard deductions.
- How to Claim: You can claim this rebate while filing your Income Tax Return (ITR)
This rebate aims to provide relief to lower and middle-income groups.
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