August 04, 2025
7 mins read
If you are an Indian resident earning a modest income, the income tax rebate under Section 87A can reduce your overall tax burden. This rebate is designed to offer tax relief to individuals falling within a specified income bracket. Whether you follow the old or new regime, understanding this section is important during your income tax return filing. The rebate amount changes depending on the applicable tax regime and income slab. Claiming it correctly can result in a complete waiver of your income tax liability. Knowing the eligibility and calculation methods ensures you do not miss this tax-saving provision.
Section 87A of the Income Tax Act allows resident individuals to claim a rebate on their total tax liability, provided their total income does not exceed the specified limit. The rebate directly reduces the final tax payable and is not a deduction from income. This benefit is available only to individuals—not to HUFs or firms. The rebate amount may differ between the old and new tax regimes. If you qualify, you can claim the rebate while completing your income tax return filing. The final tax payable is reduced by the rebate amount, but cannot go below zero.
The maximum income tax rebate under Section 87A differs based on the tax regime chosen. Under the new regime for FY 2024–25, individuals earning up to Rs. 7 lakh can claim a full rebate of Rs. 25,000. Under the old regime, those with income up to Rs. 5 lakh can claim a rebate of Rs. 12,500. The rebate is applied to the total tax payable before health and education cess. If your tax liability is less than the maximum allowable rebate, it is reduced to zero. This rebate helps you bring down your tax burden while filing your return.
If you opt for the new regime, the rebate limit under Section 87A has been revised. Here are the details:
Individuals earning up to Rs. 7 lakh can claim a full rebate of Rs. 25,000, resulting in zero tax liability.
Unlike the old regime, you do not need to invest in specific schemes to avail this rebate under Section 87A.
These revised limits are valid for the financial year 2024–25 and are useful if you have limited deductions.
The rebate brings your tax liability to zero if your income is within the threshold.
The old regime allows deductions and rebates simultaneously. Under Section 87A, the following conditions apply:
You can claim a rebate of up to Rs. 12,500 if your total income is below or equal to Rs. 5 lakh.
The income is assessed after applying deductions like Section 80C, 80D, and HRA exemptions.
The rebate is only available to resident individuals, not to NRIs or HUFs.
The rebate is applied after the normal tax is computed but before adding cess.
Before you claim the income tax rebate under Section 87A, make sure you meet the eligibility conditions. The table below explains the criteria:
Eligibility Parameter | Requirement |
Residential Status | Must be a resident individual of India |
Total Taxable Income | Up to Rs. 5 lakh (old regime) / Rs. 7 lakh (new regime) |
Age Group | No restriction based on age |
Taxpayer Category | Individuals only (not firms or HUFs) |
Type of Income | Any income, excluding specific exempt categories |
Applicable Regimes | Both old and new regimes (with different thresholds) |
Marginal relief ensures you are not taxed more than the benefit of exceeding the rebate limit by a small margin. See the table below:
Income (Rs.) | Tax Without Rebate (Rs.) | Rebate Allowed (Rs.) | Tax Payable (Rs.) |
7,00,000 | 25,000 | 25,000 | 0 |
7,01,000 | 26,050 | Marginal relief: 50 | 26,000 |
7,05,000 | 26,950 | Marginal relief: 1,950 | 25,000 |
7,10,000 and above | 27,800+ | No relief | As per tax slabs |
Marginal relief is automatically computed during income tax return filing. It ensures fairness near the threshold.
Claiming the income tax rebate under Section 87A is straightforward if you follow these steps during your ITR filing process:
Step | Description |
Tax Computation | Calculate your total income and tax based on the applicable regime. |
Apply Deductions | In the old regime, apply deductions under Sections 80C, 80D, etc. |
Check Income Threshold | Ensure total taxable income is under Rs. 5 lakh or Rs. 7 lakh. |
Select Appropriate ITR | Use ITR-1 or ITR-2 based on your income sources. |
Auto-Rebate Calculation | The rebate is automatically applied by the system during filing. |
The rebate under Section 87A only applies against certain components of your tax liability. Here is how it works:
The rebate is applied to reduce the total tax payable, excluding cess and surcharge.
Health and education cess (4%) is added after the rebate is applied and cannot be reduced.
Rebate is not available if your income is solely from long-term capital gains taxed at special rates.
If your tax liability is zero after the rebate, no excess rebate is refunded to you.
Rebate limits under Section 87A have changed over the years. The table below summarises the limits across key periods:
Financial Year | Income Limit (Rs.) | Maximum Rebate (Rs.) | Tax Regime |
2019–20 | 5,00,000 | 12,500 | Old regime only |
2020–21 | 5,00,000 | 12,500 | Both regimes |
2022–23 | 5,00,000 | 12,500 | Both regimes |
2024–25 | 7,00,000 | 25,000 | New regime only |
These changes reflect increased income thresholds and evolving tax structures.
Before you apply for the income tax rebate under Section 87A, keep the following points in mind:
Calculate total income after deductions to check eligibility accurately under the correct regime.
Use a tax calculator to see whether the old or new regime gives you more savings with or without the rebate.
Ensure your income is not entirely from LTCG or other ineligible categories for rebate purposes.
Only resident individuals are allowed to claim this rebate. NRIs are not eligible under any condition.
The income tax rebate under Section 87A is a significant relief for individuals with moderate income levels. Whether you choose the old or new regime, understanding your eligibility and applying the rebate properly during income tax return filing can bring down your tax burden significantly. This rebate is especially beneficial for salaried individuals, freelancers, and pensioners who fall within the prescribed income thresholds. Knowing how and when to claim it ensures you do not miss this important tax-saving opportunity while staying compliant with the Income Tax Act.
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No, the rebate under Section 87A cannot be claimed if your entire income is from long-term capital gains taxed at special rates under Section 112A. It only applies to regular taxable income.
Non-resident individuals (NRIs), Hindu Undivided Families (HUFs), firms, and companies are not eligible for the rebate under Section 87A. It is exclusively available to resident individuals.
First compute your total tax liability after deductions. If your income is below the threshold, the rebate is applied to reduce your tax, up to the maximum allowed. It is calculated automatically in the ITR form.
No, NRIs are not eligible for the rebate under Section 87A. Only resident individuals of India can claim this tax relief during income tax return filing.
No, the rebate under Section 87A is applied before surcharge and cess are added. It only reduces the basic income tax liability, not additional components.
You do not need a separate form. During your income tax return filing, the system auto-applies the rebate if you qualify based on your income and selected tax regime.
Any resident individual with total income not exceeding Rs. 5 lakh (old regime) or Rs. 7 lakh (new regime) is eligible to claim a tax rebate under Section 87A. It applies only to individuals, not HUFs or firms.
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