Tax rebate ₹25,000 new regime (income up to ₹7L = ZERO tax) ya ₹12,500 old regime (income up to ₹5L = ZERO tax). Automatic application + marginal relief for new regime.
| Taxable Income | New Regime Tax | Old Regime Tax |
|---|---|---|
| ₹5,00,000 | ₹0 tax (after ₹25K rebate) | ₹0 tax (after ₹12,500 rebate) |
| ₹6,00,000 | ₹0 tax (after ₹25K rebate) | ₹32,500 tax (no rebate) |
| ₹7,00,000 | ₹0 tax (after ₹25K rebate) | ₹52,500 tax (no rebate) |
| ₹7,50,000 | ~₹26,000 tax (marginal relief applies) | ₹65,000 tax (no rebate) |
| ₹10,00,000 | ₹54,600 tax (no rebate, slab applies) | ₹1,17,000 tax (no rebate) |
Excludes 4% Health + Education cess. New regime includes ₹75K standard deduction (salaried), old includes ₹50K + assumes no 80C/80D investments.
Marginal relief ensures fairness near the ₹7L threshold:
STRATEGY: Stay at or below ₹7L taxable in new regime to maximize benefit. Negotiate salary structure or use 80CCD(1B) NPS for ₹50K extra deduction.
Felix automatically tracks aapka taxable income for 87A eligibility, suggests salary restructuring or NPS contribution for marginal relief zone, compares regimes for optimal tax outcome.
Download Richify — FreeSection 87A Income Tax Act ke under, INDIVIDUALS (resident only) ko tax rebate deta hai if their taxable income FALLS WITHIN specific limits. CURRENT CAPS (FY 2026-27): NEW REGIME: ₹25,000 rebate if taxable income UP TO ₹7,00,000. Effectively means income up to ₹7L = ZERO tax. OLD REGIME: ₹12,500 rebate if taxable income UP TO ₹5,00,000. Effectively means income up to ₹5L = ZERO tax (after standard deduction). KEY POINTS: (1) NOT a deduction — it's a REBATE applied AFTER tax calculation. (2) Only for RESIDENT individuals (NRIs not eligible). (3) Applied AGAINST income tax (not cess). 4% Health + Education Cess still applies on tax above rebate. (4) Available BOTH regimes (with different caps). (5) HUF + companies NOT eligible. (6) Senior citizens (60+) eligible — same limits. EXAMPLE: ₹6.5L income new regime — basic tax slab calculation = ₹15,000. Rebate ₹15,000 (capped at actual tax). Net tax = ₹0 + cess. Same income old regime — tax = ₹42,500. Rebate ₹0 (income > ₹5L old regime limit). Net tax = ₹42,500 + cess = ~₹44,200.
MARGINAL RELIEF — for income just ABOVE ₹7L threshold in new regime (Budget 2023 introduction). PROBLEM IT SOLVES: At ₹7,00,000 income, tax = ₹0 (after rebate). At ₹7,00,001 income, tax = ₹20,000+ (no rebate available). Sudden jump of ₹20K+ tax for ₹1 extra income — unfair. MARGINAL RELIEF RULE: Tax payable cannot exceed (income - ₹7,00,000). EXAMPLES: (1) Income ₹7,10,000 (new regime). Normal tax: ₹26,000. Tax cap: ₹10,000 (income - ₹7L). Actual tax = ₹10,000. (2) Income ₹7,15,000. Normal tax: ₹26,500. Tax cap: ₹15,000. Actual tax = ₹15,000. (3) Income ₹7,25,000. Normal tax: ₹27,500. Tax cap: ₹25,000. Actual tax = ₹25,000. (4) Income ₹7,30,000+. Normal tax exceeds (income - ₹7L). Full normal tax applies. SLOPE: Effective tax rate ~100% in marginal zone (₹7L to ~₹7.27L). Above that, normal slabs apply. STRATEGY: try to stay at or below ₹7L taxable income in new regime to maximize benefit.
BOTH REGIMES OFFER 87A — but different caps + thresholds: NEW REGIME (FY 2026-27): (1) Rebate ₹25,000. (2) Income up to ₹7L = ZERO tax. (3) Basic exemption ₹3L + standard deduction ₹75K = ₹3.75L tax-free even without 87A. (4) NO need for 80C/80D investments. (5) Default regime. OLD REGIME: (1) Rebate ₹12,500. (2) Income up to ₹5L = ZERO tax. (3) Basic exemption ₹2.5L + standard deduction ₹50K = ₹3L tax-free even without 87A. (4) Requires 80C/80D investments to maximize savings. CHOICE FRAMEWORK: (a) FOR LOWER INCOME (< ₹7L gross): NEW regime ALWAYS WINS because higher 87A threshold + simpler. ZERO tax outcome. (b) FOR MID-INCOME (₹7-10L): NEW regime usually wins unless you have significant deductions (80C + 80D + HRA + 24b combined > ₹3L). (c) FOR HIGH INCOME (> ₹15L): OLD regime wins if total deductions > ₹4-5L (homeowners with home loan + 80C + 80D max). SWITCH: Salaried switch each FY via Form 12BB. Business one-time via Form 10-IEA.
Section 87A treats senior citizens (60+) SAME as non-seniors regarding rebate amount. NO extra 87A benefit for seniors. HOWEVER, seniors get OTHER preferential treatment that combines with 87A: (1) HIGHER BASIC EXEMPTION: Senior ₹3L vs general ₹2.5L (old regime). Super-senior (80+) ₹5L. New regime same ₹3L all ages. (2) 80TTB ₹50K interest deduction (vs 80TTA ₹10K). (3) Senior-specific products (SCSS 8.2%, Pradhan Mantri Vaya Vandana Yojana). (4) NO advance tax if income only from pension + interest (senior exception). EXAMPLE: 70-year senior, ₹6.5L taxable income (pension ₹5.5L + interest ₹1L). OLD REGIME: Basic ₹3L senior exemption applies. Taxable ₹3.5L. Tax ₹17,500. Senior also has 80TTB ₹50K → taxable ₹3L. Tax ₹15,000. 87A rebate caps at income ≤ ₹5L. ₹3L < ₹5L → ₹12,500 rebate. Tax = ₹15K - ₹12.5K = ₹2,500. NEW REGIME: Taxable ₹6.5L. Tax ₹15,000 (slab calculation). 87A rebate ₹25,000 covers full tax = ₹0. NEW REGIME WINS for this senior.
87A AUTOMATIC — no manual claim needed. (1) ITR filing me income enter karte hain (Schedule SI, Salary, etc.). (2) Tax calculation: total income → slab tax. (3) IT system AUTOMATICALLY applies 87A if income within threshold (₹5L old / ₹7L new). (4) Rebate shows in 'Tax Payable' section. (5) Final tax = Slab tax - 87A rebate - other rebates. EMPLOYER ROUTE FOR SALARIED: (1) Submit Form 12BB declaration to HR/payroll. (2) Choose regime + estimated income + deductions. (3) Employer calculates monthly TDS factoring 87A. (4) Monthly take-home reflects benefit. CRITICAL CHECK: (1) IT system applies 87A only if RESIDENT individual. NRIs auto-disqualified. (2) Cess 4% (Health + Education) still applies on PRE-rebate tax — small amount. (3) Surcharge applies only at higher incomes (> ₹50L) — no 87A benefit at those levels anyway. ITR PROCESSING: If your final income near ₹7L, double-check ITR computation for marginal relief application.
HISTORICAL EVOLUTION of Section 87A: (1) FY 2013-14 INTRODUCTION: ₹2,000 rebate for income up to ₹5L. (2) FY 2017-18 INCREASE: ₹2,500 for income up to ₹3.5L. (3) FY 2019-20 BIG JUMP: ₹12,500 rebate for income up to ₹5L (both old + new regime). (4) FY 2023-24 BUDGET: Separate caps. New regime ₹25,000 for income up to ₹7L. Old regime ₹12,500 for income up to ₹5L. Marginal relief introduced for new regime. (5) FY 2024-25 STANDARDIZED: Current rules continued. New regime ₹25K / ₹7L cap. (6) FY 2025-26 BUDGET REFRESH: Continued + potential adjustments. Verify current at finance budget time. CURRENT (FY 2026-27): NEW: ₹25K rebate / ₹7L cap. OLD: ₹12,500 rebate / ₹5L cap. WATCH OUT FOR: Government periodically reviews + may increase rebate amount or threshold. Always check FY-specific Income Tax Act rules. Richify Income Tax Calculator FY 2026-27 has latest figures.
TAX-FREE INCOME LIMITS using 87A (FY 2026-27): NEW REGIME with 87A: ₹7,00,000 taxable income → ₹0 tax (₹25K rebate covers all). PLUS ₹75,000 standard deduction = ₹7,75,000 GROSS income tax-free (salaried). For business income (no standard deduction): ₹7,00,000 gross. OLD REGIME with 87A: ₹5,00,000 taxable income → ₹0 tax (₹12,500 rebate covers all). PLUS ₹50,000 standard deduction = ₹5,50,000 gross income tax-free (salaried). Plus 80C ₹1.5L + 80D ₹25K + other deductions can push much higher (~₹7-8L gross tax-free). EXAMPLES: (a) Single salaried, gross ₹7.75L, new regime: ZERO tax. (b) Single salaried, gross ₹7L, old regime with ₹1.5L 80C + ₹25K 80D: net taxable ₹4.75L → ZERO tax. (c) Senior with ₹6L pension + ₹1L FD interest, old regime, ₹50K 80TTB + ₹50K standard deduction: net taxable ₹5L → ZERO tax with 87A. STRATEGIC: For income around ₹7-8L, optimize regime + 80C/80D investments to maximize 87A utilization.