Section 87A Tax Rebate Explained: How to Pay Zero Tax Up to ₹7.75 Lakhs
Section 87A of the Income Tax Act provides a tax rebate to individual resident taxpayers, ensuring low-and-middle-income earners pay zero tax.
Section 87A Limits in Old vs New Regime
In the Old Tax Regime, the rebate limit is ₹12,500 for total taxable income up to ₹5,00,000.
In the New Tax Regime, the rebate limit is increased to ₹25,000 for total taxable income up to ₹7,00,000.
Because salaried employees receive a standard deduction of ₹75,000, any gross salary up to ₹7,75,000 reduces to ₹7,00,000 net taxable income, resulting in ₹0 income tax liability.
Key Practical Takeaways:
Section 87A Comparison Between Regimes
| Feature | New Tax Regime | Old Tax Regime |
|---|---|---|
| Maximum Taxable Income | ₹7,00,000 | ₹5,00,000 |
| Maximum Rebate Amount | ₹25,000 | ₹12,500 |
| Effective Tax-Free Salary | ₹7,75,000 (with ₹75k Std Ded) | ₹5,50,000 (with ₹50k Std Ded) |
| Marginal Relief Available? | Yes, for income slightly > ₹7L | No |
Common Questions on This Topic
Does Section 87A rebate apply to capital gains from shares?
The rebate is generally allowed against normal income tax and short-term capital gains under Section 111A, but subject to recent CBDT utility validations on special-rate incomes.
Interactive Calculators for This Guide
Income Tax Calculator (Old vs New Regime)
Compare tax liability between Old and New Tax Regime for FY 2024-25 & FY 2025-26 with Section 87A rebate.
Salary Calculator (CTC to In-Hand)
Calculate exact monthly take-home salary from your annual CTC after EPF, PT, and Income Tax deductions.