Section 87A

Tax

Section 87A Tax Rebate

A rebate under India's Income Tax Act that reduces tax liability to zero for taxpayers whose net taxable income falls at or below a specified threshold, currently ₹12 lakh under the new regime.

Definition

Section 87A is a rebate under India's Income Tax Act that reduces your final tax liability to zero if your net taxable income falls at or below a specified threshold. It's applied after tax is calculated on your income, directly offsetting the computed tax rather than reducing the income figure itself.

Under the new tax regime, the threshold is currently ₹12 lakh, meaning taxpayers with net taxable income up to that amount owe no tax at all, though this excludes certain special-rate income like long-term capital gains. The Income Tax Calculator applies this rebate automatically once your income and regime are entered.

Formula

Rebate = min(Computed Tax, Maximum Rebate Cap), applicable only if Net Taxable Income ≤ Threshold

Worked Example

A taxpayer under the new regime has net taxable income of ₹11,50,000, below the ₹12 lakh threshold.

Computed tax before rebate (per new regime slabs): approximately ₹71,500
Section 87A rebate: full ₹71,500 offset, since it's within the rebate cap
Final tax payable: ₹0

If this taxpayer's income had instead been ₹12,50,000, above the threshold, the full computed tax would apply with no rebate at all, a steep cliff at the boundary.

Key Things to Know

The threshold and rebate cap differ sharply between regimes. Don't assume the new regime's ₹12 lakh figure applies under the old regime, which uses a much lower ₹5 lakh threshold.
Special-rate income is generally excluded. Long-term capital gains taxed under Section 112A typically don't benefit from this rebate even if your other income falls within the threshold.
Crossing the threshold by even a small amount removes the rebate entirely. Some structures build in marginal relief to prevent a large tax jump right at the boundary, check current-year rules.
It's a rebate, not an exemption or deduction. The income itself is still taxable and reported, the rebate simply offsets the computed liability afterward.
Applies automatically in most filing software and calculators. You don't need to separately claim it if your income qualifies, it factors into the standard computation.

Related Calculators

Income Tax Calculator →Calculate income tax for FY 2025-26 under old and new tax regimes. Includes 87A rebate, surcharge, cess, and deductions (80C, 80D, HRA). India income tax.

Frequently Asked Questions

Does Section 87A apply under both tax regimes?

Yes, but with different thresholds and rebate caps. Under the new regime, net taxable income up to ₹12 lakh gets a rebate wiping out tax entirely, while the old regime's threshold is much lower, at ₹5 lakh, with a maximum rebate of ₹12,500.

Does the rebate apply to all types of income?

No, it excludes special-rate income like long-term capital gains taxed under Section 112A, even if your overall net taxable income falls within the rebate threshold. Check which portions of your income qualify before assuming a nil tax bill.

What happens if my income is just slightly above the threshold?

You lose the rebate entirely and owe tax on the full amount above the basic exemption, not just on the portion above the threshold. Some structures include marginal relief to soften this cliff effect, worth checking in the specific year's rules.

Is Section 87A the same as a tax deduction?

No, a deduction reduces your taxable income before tax is calculated, while Section 87A is a rebate applied after tax is computed, directly wiping out the tax liability itself up to the rebate cap.

Do senior citizens get a different Section 87A threshold?

The rebate rules apply based on the regime and net taxable income, not directly on age, though senior citizens often benefit from a higher basic exemption limit under the old regime, which interacts with the rebate calculation.