Tax Rebate under Section 87A is one of the important tax rebates we get if our income is within Rs. 5 lakh in a financial year. But this tax rebate limit has been increased in new tax regime from FY 2025-26. So what is the latest Tax Rebate under Section 87A limit in old and new tax regime, are you eligible for this Tax Rebate, and everything you should know about this rebate. Let us address all these queries in this post.
Tax Rebate under Section 87A limit is Rs. 12 lakh under new tax regime (applicable from FY 2025-26). This Tax Rebate under Section 87A limit is still Rs. 5 lakh in Old regime. This means under old regime, if your income tax is under Rs. 12,500, you don’t have to pay any tax and with new regime – if your income tax is Rs. 60,000 or less, you don’t have to pay any tax, and that is the meaning of this Tax Rebate under Section 87A.
Last updated: 22 July 2026, to reflect the Section 87A rebate limits confirmed for FY 2025-26 (AY 2026-27) under Budget 2025 and continued in Budget 2026.
We will understand all this with the help of calculation examples below.
- Tax Rebate under Section 87A in Old and New Tax Regime Video
- Tax Rebate under Section 87A in Old Tax Regime
- Tax Rebate under Section 87A in New Tax Regime
- Who is eligible for 87A rebate?
- Section 87A Rebate: Old vs New Regime at a Glance
- What is the Rebate u/s 87A for FY 2025-26?
- How do I claim my 87A rebate?
- Frequently Asked Questions
- Does the Section 87A rebate apply automatically, or do I need to claim it?
- Can I get the 87A rebate on capital gains?
- What happens if my income is just above Rs. 12 lakh in the New Regime?
- Is the 87A rebate the same as a tax exemption?
- Which regime gives me a better rebate if I’m a freelancer or have business income?
- Conclusion
Tax Rebate under Section 87A in Old and New Tax Regime Video
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Based on above video, if your total income is Rs. 12.75 lakh with new regime, you don’t have to pay any tax due to Tax Rebate 87A and Standard Deduction available for Salaried and Pensioners in India.
Let us now understand Tax Rebate under Section 87A in old and new tax regime with more details.
Tax Rebate under Section 87A in Old Tax Regime
The limit of Tax Rebate under Section 87A under Old Tax Regime in FY 2025-26 is Rs. 12,500., if your taxable income is less than or equal to Rs. 5 lakh.
This means if your income tax (without applying cess) is within Rs. 12,500, you will get this maximum tax rebate of Rs. 12,500 which will cancel out your income tax and your tax liability becomes Rs. 0.
Note that Rs. 12,500 is the maximum limit applied, any tax less than this amount will be cancelled by this rebate.
On the contrary, if your income tax is more than Rs. 12,500, you will not be eligible for this rebate of Rs. 12,500 and hence you have to pay it as income tax.
Let’s understand this with the help of examples in old tax regime. Before checking below examples, you should know about Income Tax Slab Rates for FY 2025-26 for your income tax calculation purpose.
Tax Rebate Example in Old Regime
Let’s say if your taxable income is Rs. 5 lakh, below are the details of the income tax calculation:
| Old Tax Regime | FY 2025-26 |
|---|---|
| Income | Rs. 5,00,000 |
| Income Tax on Slab 5% | Rs. 12,500 |
| Tax Rebate under Section 87A | Rs. 12,500 |
| Income Tax | Rs. 0 |
As seen above, you need not have to pay any income tax when your taxable income is Rs. 5 lakh or less under old tax regime with Tax Rebate under Section 87A.
Let us take another example where taxable Income is Rs. 5.1 Lakh
| Old Tax Regime | FY 2025-26 |
|---|---|
| Income | Rs. 5,10,000 |
| Income Tax on Slab 5% | Rs. 12,500 |
| Income Tax on Slab 20% | Rs. 2000 |
| Tax Rebate under Section 87A | Rs. 0 |
| Cess of 4% | Rs. 580 |
| Income Tax | Rs. 15,080 |
As seen above, since your taxable income is above Rs. 5 lakh, you don’t get benefit of Tax Rebate under Section 87A. Which means you need to pay the tax with slab 5% = Rs. 12,500 and your total tax liability becomes Rs. 15,080 based on the calculations.
You can also use the income tax calculator for your tax calculation purpose. Below is the screenshot from tax calculator for above example. Notice that we have considered Rs. 5.1 lakh as taxable income after reducing all deductions from gross income.
You can get your taxable income below Rs. 5 lakh by using various deductions and exemptions under old tax regime.
ALSO READ: How to Save Tax on Income above Rs. 5 Lakh
Tax Rebate under Section 87A in New Tax Regime
The limit of Tax Rebate under Section 87A under New Tax Regime in FY 2025-26 is Rs. 60,000 – if your taxable income is less than or equal to Rs. 12 lakh.
In new tax regime, you get additional benefit of tax rebate at the cost of not claiming any deductions. Only standard deduction of Rs. 75,000 can be claimed with new tax regime. Apart from this, there are certain exemptions under new tax regime.
This means if your income tax (without applying cess) is within Rs. 60,000, you will get this maximum tax rebate of Rs. 60,000 which will cancel out your income tax and your tax liability becomes Rs. 0 with new tax regime.
Note that Rs. 60,000 is the maximum limit applied, any tax less than this amount will be cancelled by this rebate.
On the contrary, if your income tax is more than Rs. 60,000, you will not be eligible for this rebate of Rs. 60,000. In this case you might get marginal relief benefit with new tax regime
Let’s understand this with the help of income tax calculation examples in new tax regime.
Tax Rebate Example in New Regime
Let’s say if your taxable income is Rs. 12 lakh after reducing standard deduction of Rs. 75,000, below are the details of the income tax calculation:
| New Tax Regime | FY 2025-26 |
|---|---|
| Income | Rs. 12,00,000 |
| Income Tax on Slab 5% | Rs. 20,000 |
| Income Tax on Slab 10% | Rs. 40,000 |
| Tax Rebate u/s 87A | Rs. 60,000 |
| Rs. Income Tax | Rs. 0 |
As seen above, you need not have to pay any income tax when your taxable income is Rs. 12 lakh or less under new tax regime with Tax Rebate under Section 87A.
Let us take another example where taxable income is Rs. 12.1 lakh, after reducing the standard deduction of Rs. 75,000:
| New Tax Regime | FY 2025-26 |
|---|---|
| Taxable Income | Rs. 12,10,000 |
| Income Tax on Slab 5% (Rs. 4L–8L) | Rs. 20,000 |
| Income Tax on Slab 10% (Rs. 8L–12L) | Rs. 40,000 |
| Income Tax on Slab 15% (above Rs. 12L) | Rs. 1,500 |
| Tax before rebate | Rs. 61,500 |
| Tax Rebate u/s 87A | Rs. 0 |
| Tax without marginal relief | Rs. 63,960 (with cess) |
| Marginal Relief brings tax down to | Rs. 10,000 |
| Cess of 4% | Rs. 400 |
| Final Income Tax | Rs. 10,400 |
As seen above, since taxable income is above Rs. 12 lakh, the 87A rebate doesn’t apply. But because income is only slightly above the Rs. 12 lakh mark, marginal relief kicks in — capping your tax at just the amount your income exceeds Rs. 12 lakh (Rs. 10,000 here), instead of the full Rs. 63,960 you’d otherwise owe.
| New Tax Regime | FY 2025-26 |
|---|---|
| Income | Rs. 12,10,000 |
| Income Tax on Slab 5% | Rs. 20,000 |
| Income Tax on Slab 10% | Rs. 40,000 |
| Tax Rebate u/s 87A | Rs. 0 |
| Cess of 4% | Rs. 840 |
| Income Tax (Calculated) | |
| Marginal Relief makes Income Tax | Rs. 10,400 |
As seen above, since your taxable income is above Rs. 12 lakh, you don’t get Tax Rebate under Section 87A in new tax regime. But since the taxable income is slightly above Rs. 12 lakh, you are eligible for marginal relief in new tax regime, according to which, the tax will be equivalent to the extra amount above Rs. 12 lakh taxable income
Watch below video to understand how Marginal Relief in new tax regime works with examples:
Marginal Relief in New Tax Regime Video
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You can also Download the Income Tax Excel calculator from the top of this article, to check slab wise details of income tax calculation. Below is the screenshot for same:
Below is the video on How to Calculate Income Tax in FY 2025-26:
Who is eligible for 87A rebate?
If you are selecting Old Tax Regime, you are eligible for Tax Rebate u/s 87A if your taxable income is less than or equal to 5 lakh.
If you are selecting New Tax Regime, you are eligible for Tax Rebate u/s 87A if your taxable income is less than or equal to 12 lakh.
Section 87A Rebate: Old vs New Regime at a Glance
| Particulars | Old Tax Regime | New Tax Regime |
|---|---|---|
| Rebate Amount | Up to Rs. 12,500 | Up to Rs. 60,000 |
| Taxable Income Limit | Rs. 5,00,000 | Rs. 12,00,000 |
| Effective Tax-Free Salary (with standard deduction) | Rs. 5,50,000 | Rs. 12,75,000 |
| Standard Deduction | Rs. 50,000 | Rs. 75,000 |
| Marginal Relief Available? | No | Yes |
| Applies to Capital Gains (112A/111A)? | No | No |
This is why most salaried taxpayers earning under Rs. 12.75 lakh now default to the New Regime — there’s no need to invest in 80C, HRA, or other deductions to get to zero tax using New Tax Regime.
What is the Rebate u/s 87A for FY 2025-26?
For FY 2025-26, the Tax Rebate under Section 87A is:
- Rs. 12,500 under the Old Tax Regime (for taxable income up to Rs. 5 lakh)
- Rs. 60,000 under the New Tax Regime (for taxable income up to Rs. 12 lakh)
The New Regime’s rebate got a major boost in Budget 2025 — it was raised from Rs. 25,000 to Rs. 60,000, which is what makes income up to Rs. 12 lakh (Rs. 12.75 lakh for salaried employees) completely tax-free this year.
How do I claim my 87A rebate?
Simply if your taxable income is within 5 lakh or 12 lakh and based on your selection of old or new tax regime in FY 2025-26, you will get tax rebate automatically with these conditions during income tax return filing purpose.
Frequently Asked Questions
Does the Section 87A rebate apply automatically, or do I need to claim it?
It’s applied automatically by the income tax portal when you file your ITR, as long as your taxable income falls within the applicable limit (Rs. 5 lakh for Old Regime, Rs. 12 lakh for New Regime). You don’t need to fill any separate form.
Can I get the 87A rebate on capital gains?
No. The rebate doesn’t apply to income taxed at special rates, such as long-term capital gains under Section 112A or short-term capital gains under Section 111A on listed shares and equity mutual funds. It only applies to income taxed at normal slab rates.
What happens if my income is just above Rs. 12 lakh in the New Regime?
You lose the full 87A rebate, but marginal relief prevents a sudden tax jump. Your tax is capped at the amount by which your income exceeds Rs. 12 lakh, so crossing the threshold by a small amount won’t cost you a large sum in tax.
Is the 87A rebate the same as a tax exemption?
No. An exemption reduces your taxable income before tax is calculated. A rebate is applied after tax is calculated on your slab rates — it directly cancels out the tax amount, up to the rebate limit.
Which regime gives me a better rebate if I’m a freelancer or have business income?
The same limits apply — Rs. 5 lakh (Old) and Rs. 12 lakh (New) — but freelancers and business owners have more restrictions on switching regimes each year compared to salaried employees. Check your eligibility to switch before assuming you can move freely between regimes annually.
Conclusion
So Rs. 5 lakh and Rs. 12 lakh are the taxable income limits on which you will get Tax Rebate under Section 87A of Rs. 12,500 and Rs. 60,000 in old tax regime and new tax regime respectively.
Your main aim must be to reach this magical figures of taxable income by using various deductions and exemptions. Note that only standard deduction of Rs. 50,000 is available in old tax regime and Rs. 75,000 in new tax regime, whereas other commonly used deductions are only available in old tax regime, so plan accordingly.
Some more Reading:
- Standard Deduction in New Tax Regime
- Old vs New Tax Regime Excel Download
- All Deductions allowed for Tax Payers
- How to Calculate Income Tax using Payslip
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