Section 87A Rebate

The Section 87A rebate is a benefit for resident individuals that reduces income tax to nil up to a specified taxable income — it lowers your tax, not your income.

What it is

Section 87A gives resident individuals a rebate that is subtracted from the income tax they would otherwise owe. The key point is that it is a rebate on the tax, not a deduction from your income. So you first work out your tax on your taxable income, and then the rebate brings that tax down — often all the way to nil if your income is within the limit. The rebate is capped, so it cannot exceed the tax actually due.

Why it matters

For AY 2026-27 (FY 2025-26), under the New regime your income tax is reduced to nil for taxable income up to ₹12,00,000, with the rebate capped accordingly. Under the Old regime, tax is nil for taxable income up to ₹5,00,000. Which regime you pick changes the threshold, so the rebate is a major reason many salaried people compare the two. Reducing your taxable income first — for example through the standard deduction — can bring you within the rebate band.

Example Illustrative

Suppose a resident individual has taxable income of ₹11,50,000 under the New regime for AY 2026-27. Because this is within ₹12,00,000, the Section 87A rebate brings the income tax down to nil. If the same person had ₹13,00,000, they would be above the limit and the rebate would not wipe out the whole liability. Figures are illustrative only.