Section 87A Rebate Calculator FY 2025-26: Rebate, Marginal Relief and Zero-Tax Check
Enter your income and instantly see your Section 87A rebate, marginal relief in the Rs 12 lakh to Rs 12.7 lakh band, and whether you fall in the zero-tax zone under the new regime for FY 2025-26.
Rebate and Marginal Relief Model: New Regime Zero-Tax Threshold Analysis
Big.js arithmetic, exact CBDT marginal relief mechanism, Chart.js regime comparisonSection 87A Rebate FY 2025-26: What the Budget 2025 Changes Actually Mean
The Union Budget 2025 delivered the most significant income tax relief for the middle class in decades. Under the new tax regime for FY 2025-26 (Assessment Year 2026-27), the Section 87A rebate was raised from Rs 25,000 to Rs 60,000, and the income threshold for zero tax was pushed from Rs 7 lakh all the way up to Rs 12 lakh. For salaried individuals, the standard deduction of Rs 75,000 extends this effective tax-free ceiling to a gross salary of Rs 12.75 lakh.
This single change means that a vast segment of Indian taxpayers, from junior IT engineers to mid-career government staff to small business owners, now pay zero income tax where they previously paid tens of thousands of rupees.
But the rules around the Rs 12 lakh cliff and the marginal relief zone just above it are widely misunderstood, which is exactly what this calculator is built to clarify.
What Is Section 87A?
Section 87A of the Income Tax Act, 1961 provides a direct rebate on the tax payable by resident individual taxpayers whose taxable income falls below a specified threshold. It is not a deduction from income; it is a reduction applied directly to the computed tax.
This means it reduces your final tax bill rupee for rupee, up to the maximum rebate limit. The rebate is available to resident individuals only, not to Non-Resident Indians (NRIs), Hindu Undivided Families (HUFs), or companies.
New regime FY 2025-26: cap is Rs 60,000, applies if taxable income does not exceed Rs 12,00,000. Old regime: cap is Rs 12,500, applies if taxable income does not exceed Rs 5,00,000.
The New Regime Rebate: Rs 60,000 Up To Rs 12 Lakh
Under the new tax regime for FY 2025-26, any resident individual with taxable income up to Rs 12 lakh gets a rebate equal to their entire slab tax (capped at Rs 60,000), reducing their tax liability to exactly zero. The revised slab structure produces a tax of exactly Rs 60,000 at Rs 12 lakh of income, which the rebate wipes out completely. As per data from the Income Tax Department, this is the design intent: income up to Rs 12 lakh is meant to be genuinely tax-free.
New Regime Slabs FY 2025-26: Nil up to Rs 4 lakh, 5% from Rs 4-8 lakh, 10% from Rs 8-12 lakh, 15% from Rs 12-16 lakh, 20% from Rs 16-20 lakh, 25% from Rs 20-24 lakh, and 30% above Rs 24 lakh. The Rs 60,000 rebate under Section 87A makes income up to Rs 12 lakh effectively tax-free.
The Old Regime Rebate: Rs 12,500 Up To Rs 5 Lakh (Unchanged)
The old tax regime rebate remains unchanged at Rs 12,500, applicable only if taxable income does not exceed Rs 5 lakh. Crucially, the old regime has no marginal relief for Section 87A. If your income is even one rupee above Rs 5 lakh, you lose the entire Rs 12,500 rebate and pay full slab tax.
This hard cliff, combined with the far more generous new regime rebate, is a major reason the new regime is now the default and the better choice for most taxpayers without significant deductions.
Understanding Marginal Relief in the Rs 12 Lakh to Rs 12.7 Lakh Band
The most confusing aspect of the FY 2025-26 rules is what happens just above Rs 12 lakh. Without marginal relief, a person earning Rs 12,10,000 would face a sudden tax of Rs 61,500 (calculated across all slabs), while a person earning exactly Rs 12,00,000 would pay zero.
That means Rs 10,000 of extra income would trigger Rs 61,500 of tax, an absurd outcome. Marginal relief exists to prevent this.
How Marginal Relief Works
Marginal relief ensures that the additional tax you pay never exceeds the additional income you earned above Rs 12 lakh. If your taxable income is Rs 12,10,000, your income above the threshold is Rs 10,000, so your maximum tax
(before cess) is capped at Rs 10,000, not the Rs 61,500 the slabs would otherwise produce. The Central Board of Direct Taxes has confirmed this mechanism applies automatically during tax computation; you do not need to claim it separately.
Marginal relief amount = Slab tax minus Tax actually paid. Health and Education Cess of 4% is then added on the reduced tax figure.
The Exact Break-Even Point: Rs 12,70,588
Marginal relief keeps shrinking your effective tax benefit as income rises, until it becomes redundant. The mathematical break-even is at a taxable income of Rs 12,70,588. Below this point, the slab tax is higher than the income above Rs 12 lakh, so marginal relief helps you.
Above Rs 12,70,588, the slab tax is naturally lower than the excess, so you simply pay the full slab tax with no relief needed. For salaried individuals with the Rs 75,000 standard deduction, this break-even corresponds to a gross salary of approximately Rs 13,45,588.
Worked Marginal Relief Examples
At a taxable income of Rs 12,50,000, the slab tax would be Rs 67,500, but your income above Rs 12 lakh is only Rs 50,000. Marginal relief caps your tax at Rs 50,000, giving you Rs 17,500 of relief. Adding 4 percent cess, your final tax is Rs 52,000.
At Rs 12,70,000, slab tax is Rs 70,500 and the excess is Rs 70,000, so relief is just Rs 500 and final tax is Rs 72,800. At Rs 13,00,000, the slab tax of Rs 75,000 is fully payable with no relief, and final tax with cess is Rs 78,000.
Section 87A Rebate Reference Tables for FY 2025-26
The tables below summarise rebate eligibility, marginal relief in the transition band, and the stark difference between old and new regime rebate economics.
Rebate Eligibility Summary FY 2025-26
| Parameter | New Regime | Old Regime |
|---|---|---|
| Maximum rebate | Rs 60,000 | Rs 12,500 |
| Income limit for rebate | Rs 12,00,000 | Rs 5,00,000 |
| Zero-tax income (non-salaried) | Rs 12,00,000 | Rs 5,00,000 |
| Zero-tax gross salary (salaried) | Rs 12,75,000 | Rs 5,50,000 |
| Standard deduction | Rs 75,000 | Rs 50,000 |
| Marginal relief available | Yes (up to Rs 12.7L) | No (hard cliff) |
| Available to NRIs | No | No |
| Applies to capital gains | No | No |
Marginal Relief in the Transition Band (New Regime)
| Taxable Income | Slab Tax | Income Above 12L | Tax After Relief | Final Tax (with cess) |
|---|---|---|---|---|
| Rs 12,00,000 | Rs 60,000 | Rs 0 | Rs 0 (rebate) | Rs 0 |
| Rs 12,10,000 | Rs 61,500 | Rs 10,000 | Rs 10,000 | Rs 10,400 |
| Rs 12,25,000 | Rs 63,750 | Rs 25,000 | Rs 25,000 | Rs 26,000 |
| Rs 12,50,000 | Rs 67,500 | Rs 50,000 | Rs 50,000 | Rs 52,000 |
| Rs 12,70,000 | Rs 70,500 | Rs 70,000 | Rs 70,000 | Rs 72,800 |
| Rs 12,70,588 | Rs 70,588 | Rs 70,588 | Rs 70,588 (relief ends) | Rs 73,412 |
| Rs 13,00,000 | Rs 75,000 | Rs 1,00,000 | Rs 75,000 (no relief) | Rs 78,000 |
Zero-Tax Income by Taxpayer Type FY 2025-26 (New Regime)
| Taxpayer Type | Standard Deduction | Zero-Tax Gross Income | Notes |
|---|---|---|---|
| Salaried Employee | Rs 75,000 | Rs 12,75,000 | Most common beneficiary |
| Pensioner | Rs 75,000 | Rs 12,75,000 | Family pension gets Rs 25,000 deduction |
| Business / Professional | Not applicable | Rs 12,00,000 | No standard deduction on business income |
| Freelancer (44ADA) | Not applicable | Rs 12,00,000 | On presumptive income after 50% deduction |
Worked Rebate Scenarios from Chennai, Ahmedabad and Delhi Taxpayers
These three examples show how the Section 87A rebate and marginal relief play out for real taxpayers in different income situations.
Kavya earns a gross salary of Rs 12.7 lakh. After the Rs 75,000 standard deduction under the new regime, her taxable income is Rs 11.95 lakh, comfortably below the Rs 12 lakh threshold. Her slab tax works out to Rs 59,250, which is entirely wiped out by the Section 87A rebate.
She pays zero income tax. Last year, under the FY 2024-25 rules with a Rs 7 lakh rebate threshold, the same salary would have attracted approximately Rs 65,000 in tax. The Budget 2025 change saved her the entire amount.
Jignesh has business income of Rs 12.4 lakh with no standard deduction (business income does not qualify). His slab tax is Rs 66,000. Since his income is above Rs 12 lakh, the rebate does not apply, but marginal relief does. His income above Rs 12
lakh is Rs 40,000, so his tax is capped at Rs 40,000 rather than the full Rs 66,000. That is Rs 26,000 of marginal relief. Adding 4 percent cess, his final tax is Rs 41,600. Without marginal relief, he would have paid Rs 68,640 including cess.
Meera has taxable income of Rs 11 lakh. Under the new regime, her slab tax of Rs 50,000 is fully rebated under Section 87A, so she pays zero tax. Under the old regime, without significant deductions, her tax would be approximately Rs 1,42,500 plus cess, totalling around Rs 1.48 lakh (since old-regime rebate only applies up to Rs 5 lakh).
The difference is stark. Even if Meera had Rs 1.5 lakh in Section 80C investments and Rs 50,000 in Section 80D under the old regime, her old-regime tax would still be well above the new regime’s zero. For her income level and deduction profile, the new regime is unambiguously better.
Six Practical Tips for Maximising Your Section 87A Rebate
Keep Taxable Income At or Below Rs 12 Lakh
Under the new regime, staying at or below Rs 12 lakh taxable income means zero tax. If you are marginally above, consider timing discretionary income (such as a bonus or freelance invoice) across financial years, or making eligible contributions, to bring taxable income under the threshold and unlock the full Rs 60,000 rebate.
Salaried? Remember the Rs 75,000 Standard Deduction
The new regime gives salaried employees and pensioners a Rs 75,000 standard deduction, automatically. This means your gross salary can be as high as Rs 12.75 lakh while your taxable income stays at Rs 12 lakh, keeping you in the zero-tax zone. Always compute your rebate on taxable income (after standard deduction), not gross salary.
Do Not Confuse Rebate With Deduction
The Section 87A rebate reduces your tax directly, not your income. A common mistake is treating it as a Rs 60,000 income deduction, which it is not. It only cancels tax that has already been computed on your income, up to the cap.
If your computed tax is Rs 40,000, your rebate is Rs 40,000 (not Rs 60,000), bringing tax to zero. The rebate can never exceed your actual tax liability.
Watch Out for Capital Gains and Lottery Income
The rebate does not apply to income taxed at special rates: short-term capital gains under Section 111A, long-term capital gains under Section 112A, or lottery and betting income under Section 115BB. If you have such income, the rebate only reduces the tax on your normal slab-rate income. Compute capital gains tax separately using our Capital Gains Tax Calculator.
Compare Both Regimes Before Filing
While the new regime wins for most people up to Rs 12 lakh, taxpayers with large deductions (home loan interest up to Rs 2 lakh, HRA in metro cities, Rs 1.5 lakh Section 80C, Rs 50,000 Section 80D) may still find the old regime cheaper at higher incomes. Always run both scenarios using our Old vs New Tax Regime Calculator before locking your choice for the year.
NRIs Cannot Claim the Rebate
Section 87A is available only to resident individuals. If you are a Non-Resident Indian, you cannot claim the rebate under either regime, even if your India-sourced taxable income is below Rs 12 lakh.
NRIs should compute their liability without the rebate. Your residential status for tax purposes is determined by the number of days spent in India during the financial year, not your citizenship.
Section 87A Quick Reference for FY 2025-26
| Question | Answer |
|---|---|
| New regime rebate cap | Rs 60,000 |
| New regime income limit | Rs 12,00,000 taxable income |
| Old regime rebate cap | Rs 12,500 |
| Old regime income limit | Rs 5,00,000 taxable income |
| Standard deduction (new) | Rs 75,000 |
| Standard deduction (old) | Rs 50,000 |
| Zero-tax salary (new, salaried) | Rs 12,75,000 gross |
| Marginal relief break-even | Rs 12,70,588 taxable income |
| Marginal relief available in | New regime only |
| Rebate on capital gains | Not available (111A, 112A excluded) |
| Rebate on lottery income | Not available (115BB excluded) |
| Available to NRIs | No, resident individuals only |
| Cess on final tax | 4% Health and Education Cess |
| Rebate formula | min(Tax before cess, Rebate cap) |
Frequently Asked Questions on Section 87A Rebate
What is the Section 87A rebate for FY 2025-26?
Is income up to Rs 12 lakh completely tax-free in FY 2025-26?
What is marginal relief under Section 87A?
What is the exact break-even income for marginal relief?
Can NRIs claim the Section 87A rebate?
Does the rebate apply to capital gains?
How is the Section 87A rebate different from a tax deduction?
Do senior citizens get a higher Section 87A rebate?
What happens if my income is exactly Rs 12 lakh?
Which regime should I choose to maximise my rebate?
How do I claim the Section 87A rebate?
Was the Section 87A rebate different in FY 2024-25?
Does the rebate apply to the surcharge?
Can I get the rebate if I only have business income?
What is the cess and how does it affect my final tax?
If my salary is Rs 12.75 lakh, do I really pay zero tax?
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Disclaimer and Editorial Transparency
This Section 87A rebate calculator is provided for educational and illustrative purposes only. All calculations use the tax slabs, rebate limits, and marginal relief provisions in force for FY 2025-26 (Assessment Year 2026-27) under the Income Tax Act, 1961, as amended by the Union Budget 2025.
Budget 2026 made no changes to these provisions, so they also apply to FY 2026-27 (AY 2027-28).
The calculator assumes normal slab-rate income only. It does not compute tax on capital gains (Section 111A, 112A), lottery income (Section 115BB), or income subject to surcharge. It does not account for all possible deductions, exemptions, or special circumstances.
This tool does not constitute tax advice. For your specific tax situation, consult a qualified Chartered Accountant or tax professional, and verify all figures against the official Income Tax Department resources.
Official tax slabs, rebate rules, and the e-filing portal are available at incometax.gov.in and the Central Board of Direct Taxes at cbdt.gov.in. CalcWise.Finance receives no compensation for calculator results and performs all computations locally in your browser without storing any personal financial data.