Quick answer: The 87A rebate wipes out your income tax if your total income stays within a set limit. Under the new tax regime, you get a rebate of up to ₹60,000 for total income up to ₹12,00,000. Under the old regime, the rebate is up to ₹12,500 for total income up to ₹5,00,000. For a salaried person, that means zero tax on gross salary up to ₹12,75,000 in the new regime, after the ₹75,000 standard deduction.
You have probably seen the headline: “No tax up to ₹12 lakh.” That headline is about this rebate. It is not a new slab. The slabs still apply. Tax is still worked out slab by slab. Then the rebate cuts the tax down to zero, if you qualify.
This guide explains how the rebate works, who can claim it, where it does not apply, and what changed when Section 87A became Section 156 under the Income-tax Act, 2025.
What is the 87A rebate?
A rebate is a cut in the tax itself. It does not cut your income. The steps are simple: first work out your total income, then work out the tax on it using the slabs, then take the rebate off the tax.
Three words get mixed up often, so here is the difference:
- Rebate: reduces the tax you computed. If the tax is ₹50,000 and the rebate is ₹60,000, you pay ₹0. The extra ₹10,000 does not come back to you as a refund.
- Deduction: reduces your taxable income first, and then tax is worked out on the smaller figure. Section 80C is a deduction.
- Exemption: removes a type of income from your total income altogether, like the standard deduction for salary.
The rebate is capped at the tax you actually owe. It can bring your tax to zero. It cannot make your tax negative.
New regime vs old regime: the rebate limits
| Rule | New tax regime | Old tax regime |
|---|---|---|
| Total income limit for full rebate | ₹12,00,000 | ₹5,00,000 |
| Maximum rebate | ₹60,000 | ₹12,500 |
| Who can claim | Resident individuals only | Resident individuals only |
| Effective zero-tax gross salary | ₹12,75,000 (₹12,00,000 + ₹75,000 standard deduction) | ₹5,50,000 (₹5,00,000 + ₹50,000 standard deduction) |
| When the rebate applies | Before the 4% health and education cess | Before the 4% health and education cess |
The “effective zero-tax salary” line needs one note. The rebate limit applies to total income, not gross salary. A salaried person first takes the standard deduction off gross salary. Gross salary of ₹12,75,000 minus ₹75,000 standard deduction gives total income of ₹12,00,000. That is exactly at the limit, so the full rebate applies and the tax becomes zero. For more on the slabs behind this maths, see our new tax regime slabs guide for FY 2026-27.
Worked examples: how the numbers add up
Example 1: New regime, total income ₹12,00,000 — tax becomes zero
Step 1 — work out the slab tax for FY 2025-26 (AY 2026-27), new regime:
- First ₹4,00,000 at 0% = ₹0
- Next ₹4,00,000 (₹4,00,001 to ₹8,00,000) at 5% = ₹20,000
- Next ₹4,00,000 (₹8,00,001 to ₹12,00,000) at 10% = ₹40,000
Total slab tax = ₹60,000.
Step 2 — apply the rebate. The maximum rebate is ₹60,000, so tax after rebate = ₹60,000 − ₹60,000 = ₹0.
Step 3 — add cess. Cess of 4% on ₹0 is ₹0.
Tax payable = ₹0.
Example 2: Old regime, total income ₹5,00,000 — tax becomes zero
Step 1 — work out the slab tax, old regime:
- First ₹2,50,000 at 0% = ₹0
- Next ₹2,50,000 (₹2,50,001 to ₹5,00,000) at 5% = ₹12,500
Total slab tax = ₹12,500.
Step 2 — apply the rebate. The maximum rebate is ₹12,500, so tax after rebate = ₹0. Cess on zero is zero.
Tax payable = ₹0.
Example 3: New regime, total income ₹12,10,000 — marginal relief keeps the bill small
Here the income is ₹10,000 above the ₹12,00,000 limit, so the full rebate is not available. Without any relief, the maths would be:
- Slab tax up to ₹12,00,000 = ₹60,000
- Extra ₹10,000 (₹12,00,001 to ₹12,10,000) at 15% = ₹1,500
- Total slab tax = ₹61,500
That would be a jump of ₹61,500 in tax for ₹10,000 of extra income. Marginal relief stops that. The rule: when income just crosses the limit, the tax you pay cannot be more than the tax on income at the limit (₹0, after rebate) plus the extra income itself (₹10,000). So the tax is capped at ₹10,000.
Then add 4% cess on ₹10,000 = ₹400.
Tax payable = ₹10,400, not ₹61,500 plus cess. Our marginal relief guide walks through more cases like this.
Who can claim the 87A rebate?
All of these must be true:
- You are a resident individual in India for that year.
- Your total income is within the limit for your regime (₹12,00,000 new, ₹5,00,000 old).
- You file an income tax return for that year.
Senior citizens (age 60–79) and super senior citizens (age 80+) can claim it too, as long as they are resident individuals within the income limit. Age does not block the rebate.
These cannot claim it, in any regime:
- HUFs (Hindu Undivided Families)
- Partnership firms and LLPs
- Companies and trusts
- Non-resident Indians (NRIs)
What the rebate does NOT cover
Under the new regime, the rebate wipes out tax only on your normal slab income. It does not wipe out tax on income charged at special rates. The tax on these still has to be paid:
- Short-term capital gains on listed equity (Section 111A) — taxed at 20%.
- Long-term capital gains on listed equity (Section 112A) — taxed at 12.5% on gains above ₹1,25,000 a year.
- Lottery, gambling and game-show winnings — taxed at a flat 30%.
- Crypto / virtual digital asset gains — taxed at a flat 30%.
An example: suppose your salary income is ₹8,00,000 and you also made a short-term gain of ₹1,00,000 on listed shares. The rebate can bring the tax on your salary income to zero. But the 20% tax on the ₹1,00,000 share gain (₹20,000, plus cess) is still payable. Check your computation line by line if you have both kinds of income — the ITR utility applies the rebate only where the law allows it.
How to claim the rebate in your ITR
There is no separate form and no separate proof to attach. The steps are:
- Log in to the Income Tax e-filing portal and pick the right ITR form (ITR-1, ITR-2, and so on).
- Fill in your income details as usual.
- The rebate field is filled in by the utility after the tax is worked out — shown as “87A rebate” for AY 2026-27 returns and as “Section 156 rebate” for Tax Year 2026-27 returns.
- Check that the rebate shown matches the cap for your regime (₹60,000 new, ₹12,500 old).
- The tax shown after the rebate already includes it. The 4% cess is then added on the reduced tax.
If you use a CA or a filing service, they will apply it the same way. Our step-by-step e-filing guide covers the full filing flow. And if you missed the deadline, read our belated ITR guide — the rebate still applies to a belated return, but late fee and interest may apply.
How the rebate changed over the years
| Year | New regime: max rebate / income limit | Old regime: max rebate / income limit |
|---|---|---|
| AY 2025-26 (FY 2024-25) | ₹25,000 / up to ₹7,00,000 | ₹12,500 / up to ₹5,00,000 |
| AY 2026-27 (FY 2025-26) | ₹60,000 / up to ₹12,00,000 | ₹12,500 / up to ₹5,00,000 |
| Tax Year 2026-27 (FY 2026-27) | ₹60,000 / up to ₹12,00,000 (unchanged in Budget 2026) | ₹12,500 / up to ₹5,00,000 |
The big jump came in Budget 2025, which raised the new-regime rebate from ₹25,000 to ₹60,000 and the income limit from ₹7 lakh to ₹12 lakh. Budget 2026 kept those limits unchanged for FY 2026-27. The old-regime figures of ₹12,500 and ₹5 lakh have stayed the same through these years.
From Section 87A to Section 156
Under the Income Tax Act, 1961, the rebate lived in Section 87A. The Income-tax Act, 2025, which replaced the 1961 Act from 1 April 2026, carries the same rebate as Section 156:
- Section 156(1) — the rebate for taxpayers who pick the old slab rates (up to ₹12,500, income up to ₹5,00,000).
- Section 156(2) — the rebate for taxpayers who pick the new slab rates under Section 202, which is the new home of the old Section 115BAC (up to ₹60,000, income up to ₹12,00,000).
What this means in practice: returns for AY 2026-27 (income earned in FY 2025-26) are still governed by the 1961 Act, so the rebate there is Section 87A. Returns for FY 2026-27 (Tax Year 2026-27) fall under the 2025 Act, so the rebate there is Section 156. The limits are the same either way. When you read older articles that say “87A”, they are talking about the same rebate.
Frequently asked questions
What is the 87A rebate?
It is a rebate that cuts the tax worked out on your income. It does not cut your income. The rebate cannot be more than the tax you owe, so at best it brings your tax to zero. It cannot create a refund of tax you never owed.
Who is eligible for the 87A rebate?
Resident individuals only — including senior citizens and super senior citizens who meet the income limit. HUFs, firms, LLPs, companies, trusts and NRIs cannot claim it. You also need to file a return for that year.
Is the 87A rebate available in both old and new tax regimes?
Yes. In the old regime it is capped at ₹12,500 for total income up to ₹5,00,000. In the new regime it is capped at ₹60,000 for total income up to ₹12,00,000. You get the rebate for whichever regime you pick.
What is the income limit for the 87A rebate?
₹5,00,000 of total income in the old regime and ₹12,00,000 of total income in the new regime. The limit applies to total income after deductions, not to gross salary. For salaried people, the standard deduction is taken off first, which is why gross salary up to ₹12,75,000 can still qualify in the new regime.
Does the 87A rebate apply to capital gains?
Under the new regime, no — not to gains taxed at special rates. The rebate covers tax on normal slab income only. Tax on listed-equity STCG (20%) and LTCG (12.5% above ₹1,25,000), and on flat-rate incomes like lottery, gaming and crypto gains, is still payable.
How do I claim the 87A rebate in my ITR?
You do not file anything extra. Fill in your return on the e-filing portal and the utility applies the rebate by itself after working out your tax. Just check that the rebate amount shown matches the cap for your regime before you submit.
Official Sources
- Income Tax e-Filing Portal — incometax.gov.in (file your return and check the rebate computation)
- Central Board of Direct Taxes (CBDT) — incometaxindia.gov.in
- India Code — text of the Income-tax Act, 2025 (Section 156) — indiacode.nic.in
Reviewed by Asuthod Rathod, CA
Last updated: 15 October 2026
Disclaimer: This article gives general information only. It is not personal tax advice. Tax rules depend on your own facts, so check the official portals or speak to a qualified tax professional before you act.
Editorial byline for eircicai income tax guides — covering the Income Tax Act, 2025, section renumbering, regime comparison, and deductions. Content is reviewed by Asuthod Rathod, CA.