What is the rebate under section 87A?
Reviewed by Ranga & Company
Rebate under section 87A: The section 87A rebate cancels income tax for resident individuals with low taxable income: up to ₹60,000 under the new regime for income up to ₹12 lakh, and up to ₹12,500 under the old regime for income up to ₹5 lakh.
At a glance
- New regime (FY 2025-26)
- Up to ₹60,000, if taxable income ≤ ₹12 lakh
- Old regime
- Up to ₹12,500, if taxable income ≤ ₹5 lakh
- Who can claim
- Resident individuals only (not HUFs or NRIs)
- Not available on
- Special-rate income such as capital gains, in the new regime
How it works
The rebate is subtracted from your tax before cess. If your taxable income is ₹11.8 lakh under the new regime, your slab tax of ₹58,000 is fully cancelled, so you pay nothing. At ₹12.1 lakh there is no rebate, but marginal relief ensures you don't pay more tax than the income above ₹12 lakh.
Capital gains and the rebate
In the new regime the rebate doesn't apply to tax on special-rate income such as short-term gains on listed shares. So someone with ₹8 lakh of salary and ₹2 lakh of short-term equity gains still pays tax on the gains.
Common mistakes
- Assuming all income up to ₹12 lakh is tax-free, including capital gains
- HUFs or NRIs claiming the rebate
Frequently asked questions
What is the 87A rebate limit for FY 2025-26?
Up to ₹60,000 for resident individuals with taxable income up to ₹12 lakh under the new regime, and up to ₹12,500 for income up to ₹5 lakh under the old regime.
Can NRIs claim the 87A rebate?
No. The rebate is available only to resident individuals.
Is the 87A rebate available on capital gains?
Not under the new regime for special-rate income such as short-term gains on listed shares or long-term capital gains.
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