For FY 2025-26 (AY 2026-27), the Section 87A rebate is up to Rs 60,000 under the new (default) regime when total taxable income is up to Rs 12 lakh — reducing tax to zero. A salaried person is tax-free up to Rs 12.75 lakh gross (after the Rs 75,000 standard deduction). The old regime rebate stays at Rs 12,500 for income up to Rs 5 lakh. The rebate does not apply to capital gains taxed at special rates (Sections 111A / 112A).
Section 87A Rebate — FY 2025-26 Table
The rebate limit and income ceiling for each regime, with the effective tax-free income. See the full income tax slabs for context.
| Parameter | New Regime (default) | Old Regime |
|---|---|---|
| Maximum rebate | Rs 60,000 | Rs 12,500 |
| Taxable-income ceiling | Up to Rs 12,00,000 | Up to Rs 5,00,000 |
| Effective tax-free income | Rs 12,00,000 | Rs 5,00,000 |
| Salaried zero-tax (with std. deduction) | Rs 12,75,000 | Rs 5,50,000 |
| Standard deduction | Rs 75,000 | Rs 50,000 |
| Marginal relief above limit | Yes | N/A |
| Rebate on STCG 111A / LTCG 112A | No | No |
Rebate figures are for resident individuals. The Income-tax Act, 2025 renumbers provisions from AY 2026-27 but the familiar "Section 87A" reference is retained.
How the Rs 60,000 Rebate Works
The rebate is applied after tax is computed on the slabs and before the 4% health & education cess. If your tax on slab income is Rs 60,000 or less and your taxable income is within the ceiling, the rebate wipes it out entirely.
Non-salaried · Rs 12,00,000
Salaried · Rs 12,75,000 gross
The rebate is automatically applied while filing your income tax return — no separate claim or declaration is needed. Try the numbers on our income tax calculator.
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File My ITR →Old Regime vs New Regime Rebate
For FY 2025-26 the new regime is the default. Its Rs 60,000 rebate is far more generous than the old regime's Rs 12,500 — which is why most taxpayers with limited deductions are better off in the new regime.
Old regime — rebate up to Rs 5L
- Rebate limited to Rs 12,500
- Applies only if taxable income ≤ Rs 5 lakh
- Standard deduction Rs 50,000
- Chapter VI-A deductions (80C, 80D) available
- No marginal relief at the Rs 5L edge
New regime — rebate up to Rs 12L
- Rebate up to Rs 60,000
- Applies if taxable income ≤ Rs 12 lakh
- Standard deduction Rs 75,000
- Most Chapter VI-A deductions not available
- Marginal relief above Rs 12 lakh
The new regime does not allow most deductions (80C, 80D, HRA, home-loan interest on let-out limited). If your genuine deductions are large, the old regime with 80C/80D may still beat the Rs 60,000 rebate — run both before you choose. See our old vs new regime comparison.
Not sure which regime saves you more?
Compare Old vs New →Marginal Relief — the Rs 12L Cliff, Softened
Without relief, earning Rs 1 over Rs 12 lakh would cost the full Rs 60,000+ tax — a harsh cliff. Budget 2025 provides marginal relief in the new regime: where income slightly exceeds Rs 12 lakh, the tax payable is capped at the amount by which income exceeds Rs 12 lakh.
Income Rs 12,10,000 (with relief)
Income Rs 12,00,000 (at limit)
Marginal relief only helps for a narrow band above Rs 12 lakh (roughly up to about Rs 12.75 lakh, where normal slab tax becomes the lower figure). Beyond that band the full slab tax applies with no rebate. This is different from — and in addition to — the older marginal-relief provisions at the Rs 50L and Rs 1cr surcharge thresholds.
Incomes Where 87A Does NOT Apply
Even if your total income is below Rs 12 lakh, the rebate cannot reduce tax on income taxed at special rates — chiefly capital gains after the 23 July 2024 changes.
| Income type | Section | Tax rate | 87A rebate? |
|---|---|---|---|
| STCG on listed equity / equity MF | 111A | 20% | No |
| LTCG on listed equity / equity MF | 112A | 12.5% (above Rs 1.25L) | No |
| Lottery / horse-race winnings | 115BB / 115BBJ | 30% | No |
| Salary / business / interest / rent | Normal slabs | Slab rates | Yes (if ≤ Rs 12L) |
Post-23-Jul-2024: STCG u/s 111A on listed equity is 20%; LTCG u/s 112A is 12.5% with a Rs 1.25 lakh annual exemption.
If Rs 12 lakh of your income includes, say, Rs 2 lakh of equity STCG, the rebate applies only to the normal-slab portion. The tax on the STCG at 20% stands on its own — the rebate cannot cancel it. Many DIY filers miss this and get a demand notice.
Frequently Asked Questions
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