About this tool
Section 87A provides a tax rebate making your final tax zero if your taxable income is below a threshold. New regime FY 2025-26: ₹12 lakh (₹12.75 lakh for salaried with ₹75,000 standard deduction). Old regime: ₹5 lakh. The rebate is capped at the tax computed - it doesn't flow as a refund.
How it works
Step 1
Confirm you're a resident individual (HUFs and non-residents not eligible).
Step 2
Calculate total taxable income after deductions.
Step 3
If taxable income ≤ ₹12 lakh (new) or ₹5 lakh (old): tax payable = ₹0.
Step 4
4% cess applies on tax above zero - so ₹0 tax = ₹0 cess.
About the Section 87A rebate
Section 87A of the Income Tax Act gives resident individuals a rebate that can reduce their income tax to zero when taxable income stays under a set threshold. It is not an exemption or a deduction; it is a rebate applied after the tax is computed, capped at the amount of tax due. Below the threshold the rebate equals your full tax, so you pay nothing. Cross the threshold and the rebate disappears, leaving only marginal relief to soften the edge.
For FY 2025-26 (assessment year 2026-27) the new tax regime raised the 87A threshold to Rs 12 lakh of taxable income. A salaried person also gets the Rs 75,000 standard deduction under the new regime, which lifts the effective zero-tax salary to Rs 12.75 lakh. The old regime keeps its long-standing threshold of Rs 5 lakh with a maximum rebate of Rs 12,500. This calculator applies the right slab table and rebate limit for the regime you pick.
How the rebate is calculated
Taxable income = Total income - Standard deduction (if salaried)
Tax before rebate = slab tax on taxable income
87A rebate = full tax, if taxable income <= threshold
else 0 (marginal relief may apply just above)
Tax after rebate = Tax before rebate - 87A rebate
Final tax = Tax after rebate + 4% health and education cess
New regime threshold (FY 2025-26): Rs 12,00,000
Old regime threshold: Rs 5,00,000 (max rebate Rs 12,500)
- Standard deduction is Rs 75,000 (new regime) or Rs 50,000 (old regime) for salaried taxpayers.
- Threshold is on taxable income after deductions, not gross income.
- Cess of 4 percent applies only to tax above zero, so a fully rebated tax means zero cess.
- Eligibility is limited to resident individuals; HUFs, firms, and non-residents cannot claim 87A.
Worked example
A salaried resident earns Rs 12.75 lakh gross under the new regime for FY 2025-26.
- Apply the standard deduction: 12,75,000 minus 75,000 = 12,00,000 taxable income.
- Compute slab tax on Rs 12 lakh under the new slabs: it works out to Rs 60,000 before rebate.
- Check the threshold: taxable income of Rs 12 lakh is at or below the Rs 12 lakh limit, so 87A rebates the full Rs 60,000.
- Add cess: tax after rebate is zero, so the 4 percent cess is also zero.
New regime versus old regime 87A
| Feature | New regime (FY 2025-26) | Old regime |
|---|---|---|
| 87A threshold (taxable income) | Rs 12,00,000 | Rs 5,00,000 |
| Maximum rebate | Tax on Rs 12 lakh | Rs 12,500 |
| Standard deduction (salaried) | Rs 75,000 | Rs 50,000 |
| Effective zero-tax salary | Rs 12,75,000 | Rs 5,50,000 |
| Marginal relief just above threshold | Yes | No |
| Who is eligible | Resident individuals | Resident individuals |
Common pitfalls
- Confusing gross income with taxable income. The threshold applies after deductions; a Rs 12.75 lakh salary still qualifies once the standard deduction is applied.
- Assuming the rebate is a refund. 87A only cancels tax that exists; it never pays out cash beyond your tax liability.
- Forgetting marginal relief. Just above Rs 12 lakh in the new regime, your extra tax cannot exceed the income over the threshold, so a small overshoot does not trigger the full slab tax.
- Claiming it as a non-resident or HUF. Only resident individuals are eligible.
- Mixing up regimes. The Rs 12 lakh limit is new-regime only; the old regime stays at Rs 5 lakh.
Frequently asked questions
Is income up to Rs 12 lakh really tax-free under the new regime?
Yes. For FY 2025-26 the new regime gives a full Section 87A rebate when taxable income is up to Rs 12 lakh, so the tax computed on that income is cancelled and you pay zero. A salaried taxpayer also gets the Rs 75,000 standard deduction, which lifts the effective zero-tax salary to Rs 12.75 lakh. This is confirmed by CBDT guidance for the new regime.
What happens if my income is just above Rs 12 lakh?
Marginal relief applies in the new regime. Just above the Rs 12 lakh threshold, your total tax cannot exceed the amount by which your income crosses the threshold. So if taxable income is Rs 12,10,000, you do not suddenly owe the full slab tax on the whole Rs 12.1 lakh; the extra tax is limited to roughly the Rs 10,000 of income over the line.
Does Section 87A apply to senior citizens?
Yes. Section 87A is available to all resident individuals regardless of age, in both the old and new regimes. Under the old regime the basic exemption limit is already higher for senior citizens (Rs 3 lakh) and super seniors (Rs 5 lakh), so the 87A rebate often makes little additional difference for them there, but it still applies.
What is the difference between the new regime and old regime 87A limit?
For FY 2025-26 the new regime rebates tax fully up to Rs 12 lakh of taxable income, with a much larger maximum rebate. The old regime keeps its threshold at Rs 5 lakh with a maximum rebate of Rs 12,500. Salaried taxpayers get a Rs 75,000 standard deduction in the new regime versus Rs 50,000 in the old, so the effective zero-tax salary is Rs 12.75 lakh new versus Rs 5.5 lakh old.
Is the 87A rebate a refund I receive in cash?
No. The rebate only cancels tax that has been computed; it is capped at your tax liability and never paid out as a separate refund. If your tax before rebate is Rs 60,000 and you qualify, the rebate is Rs 60,000 and your tax becomes zero. It cannot turn into a negative figure or a cash payout beyond the tax you owed.