Rebate Under Section 87A

Section 87A provides tax relief to resident individuals whose total taxable income is within a prescribed limit.
It reduces (rebates) the income tax liability — not the income itself.

Section 87A — Summary Table

The FY 2025–26 enhancement (₹12 L limit / ₹60 k rebate) is as per the Union Budget 2025 proposal, still subject to final notification when enacted.

Step-by-Step Rebate Calculation Example

Example 1 – New Regime (FY 2025–26)

Taxable income: ₹7,50,000

1. Tax before rebate:

   • Up to ₹4,00,000 → Nil

   • ₹4,00,001–₹8,00,000 → 5% of ₹3,50,000 = ₹17,500
     → Tax before rebate = ₹17,500

2. Rebate u/s 87A: Income ≤ ₹12,00,000 → eligible; rebate = lesser of ₹60,000 or tax liability (₹17,500).
   → Rebate = ₹17,500

3. Tax after rebate = ₹0

4. Add cess (4%) = 0

✅ Final tax payable = ₹0

Example 2 – Old Regime (FY 2025–26)

Taxable income: ₹7,50,000

1. Tax before rebate:

   • Up to ₹2,50,000 → Nil

   • ₹2,50,001–₹5,00,000 → 5% = ₹12,500

   • ₹5,00,001–₹7,50,000 → 10% of ₹2,50,000 = ₹25,000
     → Tax before rebate = ₹37,500

2. Rebate u/s 87A: Not eligible (income > ₹5,00,000)
   → Rebate = ₹0

3. Tax after rebate = ₹37,500 + 4% cess = ₹39,000 (approx.)

❌ Final tax payable ≈ ₹39,000

✅ Key Points to Remember

• Rebate u/s 87A is available only to resident individuals (not HUFs, NRIs, or firms).

• It is applied after all deductions (under Chapter VI-A like 80C, 80D, etc.) and before cess.

• Rebate is limited to actual tax liability.

• Not applicable on income taxed at special rates (e.g., LTCG u/s 112A).