Question 1

What is Section 87A tax rebate in India?

Accepted Answer

Section 87A provides a tax rebate to resident Indian individuals with income below a specified threshold. It eliminates tax entirely for eligible taxpayers. FY 2025-26: new regime income ≤ ₹7L → nil tax (max rebate ₹25,000); old regime income ≤ ₹5L → nil tax (max rebate ₹12,500). Budget 2026-27: new regime extended to ₹12L → nil tax. The rebate is applied after computing slab-based tax and before adding 4% cess.

Question 2

What is the 87A rebate limit for FY 2025-26?

Accepted Answer

FY 2025-26: New regime: income up to ₹7,00,000 → full rebate (nil tax). Maximum rebate = ₹25,000. Old regime: income up to ₹5,00,000 → full rebate. Maximum rebate = ₹12,500. For salaried: standard deduction (₹50K new regime) reduces gross income before applying threshold. ₹7.5L salary → taxable ₹7L → qualifies for 87A → nil tax.

Question 3

What is the 87A rebate in Budget 2026-27?

Accepted Answer

Budget 2026-27 extended the 87A rebate under new regime: income up to ₹12,00,000 → nil tax (100% rebate). For salaried: gross salary up to ₹12,75,000 → taxable ₹12L (after ₹75K std deduction) → nil tax via 87A. Old regime 87A threshold: unchanged at ₹5L. This is the most significant 87A expansion in the provision's history.

Question 4

Is Section 87A applicable on LTCG from mutual funds?

Accepted Answer

No — Section 87A rebate does NOT apply to Long-Term Capital Gains (LTCG) on equity shares and equity mutual funds. CBDT clarified this in 2024. Even if your total income is below the 87A threshold, LTCG is taxed at 12.5% (above ₹1.25L annual exemption) without 87A benefit. Solution: keep annual LTCG gains below ₹1.25L (systematic tax harvesting) to avoid any LTCG tax. Regular salary/business income: fully covered by 87A.

Question 5

Who is eligible for Section 87A rebate?

Accepted Answer

Eligibility: (1) Must be a Resident Individual (not NRI); (2) Total income (after all deductions) must be ≤ threshold (₹7L new regime FY 2025-26; ₹12L Budget 2026-27; ₹5L old regime); (3) Not applicable to companies, firms, HUF, or AOP; (4) Applies to income taxable at regular rates — NOT LTCG on equity, NOT special rate income (crypto, lottery).

Question 6

Is salary up to ₹7 lakh tax-free in FY 2025-26?

Accepted Answer

Yes — under new regime in FY 2025-26, salary up to ₹7.5L gross (taxable ₹7L after ₹50K standard deduction) is effectively zero tax via 87A rebate. Exactly: taxable income ≤ ₹7L → 87A rebate → nil tax. For salaried employees: ₹7,50,000 gross salary → ₹7L taxable → zero tax. Budget 2026-27 extends this to ₹12L taxable (₹12.75L gross salary).

Question 7

How to claim Section 87A rebate in ITR?

Accepted Answer

The 87A rebate is automatically computed in ITR — you don't need to specifically claim it separately. When filing ITR on incometax.gov.in: the system calculates taxable income → applies slab tax → checks 87A eligibility → applies rebate automatically. Employer: should already account for 87A in TDS calculation (if taxable income ≤ threshold, employer deducts zero TDS). If employer deducted excess TDS without applying 87A: file ITR and claim refund.

Question 8

87A rebate on special rate income — crypto, lottery?

Accepted Answer

No — 87A is NOT applicable to special rate income: Crypto/VDA gains: taxed at 30% flat, no 87A rebate. Lottery/gambling winnings: taxed at 30% flat, no rebate. Short-term capital gains on equity (STCG): taxed at 20%, but 87A may apply if total income (including STCG) is ≤ ₹7L and STCG is not the reason income exceeds ₹7L — this is complex; consult CA. Long-term capital gains on equity: definitively excluded from 87A (CBDT 2024).

Question 9

What is the difference between 87A rebate and 80C deduction?

Accepted Answer

Section 80C: reduces taxable income (deduction from income). Max ₹1.5L — reduces income before computing tax. Only available in old regime. Section 87A: reduces tax (rebate on computed tax). Applied after computing slab-based tax — eliminates the entire tax if within threshold. Available in both old and new regime (different thresholds). They work at different stages: 80C reduces income → then 87A eliminates the resulting tax if still within threshold.

Question 10

Is 87A available to NRI?

Accepted Answer

No — Section 87A is available only to Resident Individuals. NRIs (Non-Resident Indians) are not eligible for the 87A rebate even if their Indian income is below the threshold. NRIs are taxed on Indian-sourced income at applicable rates without 87A benefit. NRIs with income from Indian investments (interest, dividends, capital gains) must pay tax at standard rates. Residential status determination: based on number of days in India during the financial year.

Question 11

87A rebate — how is it calculated?

Accepted Answer

Step 1: Compute total income (gross income − all deductions). Step 2: Check if total income ≤ 87A threshold (₹7L new regime FY 2025-26; ₹12L Budget 2026-27; ₹5L old regime). Step 3: Compute tax on total income using applicable slab rates. Step 4: Rebate = min(tax computed in Step 3, ₹25,000/₹12,500). Step 5: Net tax = Tax − Rebate. Step 6: Add 4% cess on net tax. If net tax after rebate = 0: nil tax payable.

Question 12

Can I claim 87A rebate in new and old regime?

Accepted Answer

Yes — 87A is available in BOTH old and new regime, but with different thresholds: New regime FY 2025-26: ₹7L limit, max rebate ₹25,000. New regime Budget 2026-27: ₹12L limit. Old regime: ₹5L limit, max rebate ₹12,500 (both FYs). Choose regime that gives more benefit: if deductions are high (old regime), ₹5L might still be achievable. If no deductions: new regime with ₹7L/₹12L threshold.

Question 13

What happens if income is ₹1 above 87A threshold?

Accepted Answer

Critical 'cliff effect': income ₹1 above the threshold means zero 87A rebate — you pay full slab tax. Example (FY 2025-26 new regime): ₹7L → nil tax. ₹7,00,001 → tax ≈ ₹25,000 (no rebate). This ₹1 income difference triggers ₹25,000 tax! Solution for income near the threshold: maximise employer NPS (14% limit Budget 2026), meal vouchers, reimbursements to bring taxable income to exactly ₹7L/₹12L or below. Marginal relief: NOT available under 87A (unlike surcharge which has marginal relief).

Question 14

Section 87A and senior citizens — is there extra benefit?

Accepted Answer

Senior citizens (60–80 years) and super senior citizens (80+) have higher basic exemptions under old regime: 60–80: ₹3L basic exemption (vs ₹2.5L general). 80+: ₹5L basic exemption. Combined with 87A: senior citizens under old regime effectively pay no tax up to ₹8L (₹5L basic + ₹3L deductions). New regime: same 87A threshold (₹7L FY 2025-26; ₹12L Budget 2026-27) for all individuals regardless of age — no age-based extra benefit under new regime.

Question 15

Does 87A apply to income from house property (rental)?

Accepted Answer

Yes — rental income is regular income and fully eligible for 87A rebate. If total income (including rental income after 30% standard deduction on rental income) is ≤ ₹7L (FY 2025-26) or ₹12L (Budget 2026-27): 87A applies → nil tax. Example: Salary ₹5L + Rental income ₹2.5L − 30% (₹75K) = net rental ₹1.75L. Total income = ₹6.75L − ₹50K std ded = ₹6.25L taxable → under ₹7L → 87A → nil tax.

Question 16

87A rebate on dividends and interest?

Accepted Answer

Yes — dividend income and interest income are regular income eligible for 87A. If total income (including dividends and interest) stays below the 87A threshold: nil tax. Dividend: taxed at slab rate (since 2021, DDT removed). Interest from FDs, savings accounts, bonds: taxed at slab rate. If total income including these is ≤ ₹7L (new regime FY 2025-26): 87A gives full rebate → nil tax. Submit Form 15G/15H to avoid TDS if income below taxable limit.

Question 17

What is the maximum 87A rebate amount?

Accepted Answer

Old regime: maximum ₹12,500. New regime FY 2025-26: maximum ₹25,000. Budget 2026-27 new regime: maximum = full tax on up to ₹12L taxable income (no fixed cap — entire tax is rebated). The rebate cannot exceed the actual tax computed. If tax is ₹15,000 (income slightly below threshold): rebate = ₹15,000 (not the maximum cap). If tax exceeds the cap: rebate = cap amount, not full tax.

Question 18

87A rebate filing in ITR-1 vs ITR-2?

Accepted Answer

87A rebate is automatically computed in ALL ITR forms. ITR-1 (Sahaj): salaried employees with salary/one house property/interest income — 87A auto-applied. ITR-2: includes capital gains — 87A applies only on regular income tax, NOT on LTCG/STCG tax. ITR-3: business income + salary — 87A applied on total tax from regular income. The ITR form itself handles 87A computation correctly — no manual entry needed. Verify in 'Tax Computation' section of your ITR before submission.

Question 19

Section 87A vs Section 80C — which saves more tax?

Accepted Answer

They work together, not against each other. 80C reduces taxable income → may bring you below 87A threshold → 87A then eliminates entire tax. Example: income ₹8.5L (old regime). Without 80C: taxable ₹8L → tax ₹75,500 (above ₹5L → no 87A). With 80C ₹1.5L: taxable ₹6.5L → still above ₹5L → no 87A → tax ₹45,500. With 80C+80D+std ₹2.5L: taxable ₹6L → above ₹5L → no 87A → tax ₹32,500. Need ₹3.5L deductions to get below ₹5L threshold for old regime 87A.

Question 20

Is 87A rebate applicable in AY 2025-26?

Accepted Answer

AY 2025-26 corresponds to FY 2024-25 (income earned April 2024 – March 2025). For AY 2025-26: new regime limit is ₹7L (₹25,000 max rebate); old regime limit ₹5L (₹12,500). This is the same as FY 2025-26 (AY 2026-27). Budget 2026-27 (AY 2027-28) extends new regime to ₹12L. The LTCG exclusion from 87A has applied since AY 2024-25 (CBDT clarification).

Question 21

Section 87A for partnership firms and HUF?

Accepted Answer

Section 87A is NOT available to: Partnership firms; LLPs; HUF (Hindu Undivided Family); Companies; Co-operative societies; AOP (Association of Persons) unless all members are individuals. HUF gets the basic exemption (₹3L old regime) but NO 87A rebate. Only Resident Individuals qualify for 87A. If your business is structured as HUF: HUF pays regular slab tax without 87A even if income is below ₹7L.

Question 22

Can employers deduct wrong TDS if 87A applies?

Accepted Answer

Common error: employer deducts TDS without applying 87A rebate for employees whose income is below the threshold. If your taxable income is ≤ ₹7L and employer has deducted TDS: file ITR and claim refund — 87A rebate will be applied and full TDS refunded. Prevent this: declare your 87A eligibility to employer via Form 12BB / regime declaration at start of FY. Employer should then deduct zero TDS. If they still deduct: ITR refund is the remedy — usually processed within 30–60 days.

Question 23

Section 87A — Budget 2026 vs FY 2025-26 comparison?

Accepted Answer

FY 2025-26 new regime: 87A applies if income ≤ ₹7L. Max rebate ₹25,000. Budget 2026-27: 87A applies if income ≤ ₹12L. Entire tax rebated. This ₹5L expansion in threshold means: income between ₹7L and ₹12L no longer pays tax from FY 2026-27. Estimated benefit: taxpayers with income ₹7–12L save ₹25,000–₹90,000 per year. The Budget 2026 87A expansion is the most significant personal tax relief in India in recent years.

FY	Old Regime	New Regime
2013-14 (first)	₹2L (₹2K rebate)	N/A
2019-20	₹5L (₹12,500)	N/A
2023-24	₹5L (₹12,500)	₹7L (₹25,000)
2025-26	₹5L (₹12,500)	₹7L (₹25,000)
2026-27 🆕	₹5L (₹12,500)	₹12L (Full)

Section 87A Rebate Calculator India 2025-26 & 2026-27 Check If You Qualify for ₹12,500 / ₹25,000 Tax Rebate — Zero Tax on Income Up to ₹7L (FY 2025-26) or ₹12L (Budget 2026)

Section 87A — Complete Guide for FY 2025-26 & Budget 2026-27

87A History — How the Limit Has Grown

Critical: 87A Not Available for LTCG (Budget 2024)

3 Section 87A Rebate Scenarios India 2025-26

1. Rahul — ₹6.8L Salary Income — Full 87A Rebate (FY 2025-26, New Regime) ✅

2. Priya — ₹6L Salary + ₹1.5L LTCG — Partial 87A Rebate 87A Warning ⚠️

3. Meena — ₹11L Salary (Old Regime, Max Deductions) — Does 87A Apply? 🏛️

Frequently Asked Questions — Section 87A Tax Rebate India

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