Tax Rebate under Section 87A in Old & New Tax Regime

tax rebate under section 87A

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 2023-24. 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.

In Budget 2023, Tax Rebate under Section 87A limit was increased from Rs. 5 lakh to Rs. 7 lakh under new tax regime (applicable from FY 2023-24). This Tax Rebate under Section 87A limit is still Rs. 5 lakh in Old regime. This means that under old regime, if your income tax is under Rs. 12,500, you don’t have to pay any tax and under new regime, if your income tax is Rs. 25,000, you don’t have to pay any tax, and that is the meaning of this Tax Rebate under Section 87A.

We will understand all this with the help of calculation examples below.

Tax Rebate under Section 87A under Old and New Tax Regime Video

YouTube player

Watch more Videos on YouTube Channel

Let us now understand Tax Rebate under Section 87A under old and new tax regime in more details.

Tax Rebate under Section 87A Limit under Old Tax Regime

The limit of Tax Rebate under Section 87A under Old Tax Regime in FY 2023-24 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 in FY 2023-24, 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 2023-24 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 RegimeFY 2023-24
IncomeRs. 5,00,000
Income Tax on Slab 5%Rs. 12,500
Tax Rebate under Section 87ARs. 12,500
Rs. Income TaxRs. 0
Tax Rebate under Section 87A example with Old Tax Regime

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 RegimeFY 2023-24
IncomeRs. 5,00,000
Income Tax on Slab 5%Rs. 12,500
Income Tax on Slab 20%Rs. 2000
Tax Rebate under Section 87ARs. 0
Cess of 4%Rs. 580
Rs. Income TaxRs. 15,080
Tax Rebate under Section 87A example with Old Tax Regime

As seen above, since your taxable income is above Rs. 5 lakh, you don’t get 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.

Income Tax Calculation with Tax Rebate example
Income Tax Calculation with Tax Rebate example

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 Limit under New Tax Regime

The limit of Tax Rebate under Section 87A under New Tax Regime in FY 2023-24 is Rs. 25,000., if your taxable income is less than or equal to Rs. 7 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. 50,000 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. 25,000 in FY 2023-24, you will get this maximum tax rebate of Rs. 25,000 which will cancel out your income tax and your tax liability becomes Rs. 0 with new tax regime.

Note that Rs. 25,000 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. 25,000, you will not be eligible for this rebate of Rs. 25,000 and hence you have to pay it as income tax.

Let’s understand this with the help of examples in new tax regime. Before checking below examples, you should know about Income Tax Slab Rates for FY 2023-24 for your income tax calculation purpose.

Tax Rebate Example in New Regime

Let’s say if your taxable income is Rs. 7 lakh, below are the details of the income tax calculation:

Old Tax RegimeFY 2023-24
IncomeRs. 7,00,000
Income Tax on Slab 5%Rs. 15,000
Income Tax on Slab 10%Rs. 10,000
Tax Rebate u/s 87ARs. 25,000
Rs. Income TaxRs. 0
Tax Rebate under Section 87A example with Old Tax Regime

As seen above, you need not have to pay any income tax when your taxable income is Rs. 7 lakh or less under new tax regime with Tax Rebate under Section 87A.

Let us take another example where taxable Income is Rs. 7.1 Lakh

Old Tax RegimeFY 2023-24
IncomeRs. 7,10,000
Income Tax on Slab 5%Rs. 15,000
Income Tax on Slab 10%Rs. 11,000
Tax Rebate u/s 87ARs. 0
Cess of 4%Rs. 1040
Rs. Income TaxRs. 27,040
Tax Rebate under Section 87A example with Old Tax Regime

As seen above, since your taxable income is above Rs. 7 lakh, you don’t get Tax Rebate under Section 87A in new tax regime. Which means you need to pay the tax with slab 5% = Rs. 12,500 and slab 10% and your total tax liability becomes Rs. 27,040 based on the calculations.

You can also Download the Income Tax Excel calculator to check slab wise details of income tax calculation. Below is the screenshot for same:

Income Tax Calculator in Excel FY 2023-24
Income Tax Calculator in Excel FY 2023-24

Below is the video on How to Calculate Income Tax in FY 2023-24:

How to Calculate Income Tax FY 2023-24 Excel Video

YouTube player

Watch more Videos on YouTube Channel

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 7 lakh.

What is the rebate u/s 87A for FY 2023-24?

For FY 2023-24, Tax Rebate under Section 87A limit is Rs. 12,500 (taxable income within Rs. 5 lakh) under Old tax regime and Rs. 25,000 (taxable income within Rs. 7 lakh) under New tax regime.

How do I claim my 87A rebate?

Simply if your taxable income is within 5 lakh or 7 lakh and based on your selection of old or new tax regime in FY 2023-24, you will get tax rebate automatically with these conditions during income tax return filing purpose.

Conclusion

So Rs. 5 lakh and Rs. 7 lakh are the taxable income limits on which you will get Tax Rebate under Section 87A of Rs. 12,500 and Rs. 25,000 respectively in old and new tax regime.

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 both tax regime, whereas other commonly used deductions are only available in old tax regime, so plan accordingly.

Some more Reading:

You can Donate Too!

Found this Helpful? DONATE any amount to see more useful Content. Scan below QR code using any UPI App!

fincalc donate

UPI ID: abhilashgupta8149-1@okhdfcbank

Verify that you are “Paying Abhilash Gupta” before making the transaction so that it reaches me. It makes my Day 🙂

Thank you for Donating. Stay Tuned!

Income Tax Calculator App – FinCalC

For Income Tax Calculation on your mobile device, you can Download my Android App “FinCalC” which I have developed for you to make your income tax calculation easy.

What you can do with this mobile App?

  • Calculate Income Tax for new FY 2023-24 and previous FY 2022-23
  • Enter estimated Investments to check income tax with Old and New Tax Regime
  • Save income tax details and track regularly
  • Know how much to invest more to save income tax
  • More calculators including PPF, SIP returns, Savings account interest and lot more
Download Income Tax Calculator APP from play store
Download Income Tax Calculator APP from play store

Use Popular Calculators:

I’d love to hear from you if you have any queries about Personal Finance and Money Management.

JOIN Telegram Group and stay updated with latest Personal Finance News and Topics.

Download our Free Android App – FinCalC to Calculate Income Tax and Interest on various small Saving Schemes in India including PPF, NSC, SIP and lot more.

Follow the Blog and Subscribe to YouTube Channel to stay updated about Personal Finance and Money Management topics.


Leave a Comment

Your email address will not be published. Required fields are marked *