Section 87A provides a rebate from tax payable to resident individuals whose total income does not exceed prescribed limits.
## Old Tax Regime
Threshold (Total Income): ₹5,00,000
Maximum Rebate: ₹12,500
Rebate = Lower of (Tax payable, ₹12,500)
## New Tax Regime (Sec 115BAC)
Threshold (Total Income): ₹12,00,000
Maximum Rebate: ₹60,000
Rebate = Lower of (Tax payable, ₹60,000)
Marginal Relief is available when income marginally exceeds ₹12,00,000 — so that the additional tax does not exceed the additional income above ₹12,00,000.
## Important Restrictions (New Regime)
Rebate u/s 87A is NOT available on tax payable on special incomes under:
Sec 111A (STCG on listed equity)
Sec 112A (LTCG on listed equity)
Sec 112 (other LTCG)
Sec 115BB (winnings)
Other special rate sections
It is available only on normal slab income tax.
Worked example
### Example 1
Example 1 (New Regime): Total income = ₹12,00,000 (all normal). Tax before rebate = ₹60,000. Rebate u/s 87A = ₹60,000. Tax payable = Nil.
### Example 2
Example 2 (Marginal Relief, New Regime): Total income = ₹12,10,000. Tax on slab basis = ₹61,500. Tax without rebate would be ₹61,500. Income exceeds ₹12,00,000 by ₹10,000, so tax should not exceed ₹10,000. Tax payable after marginal relief = ₹10,000.
### Example 3
Example 3 (Old Regime): Total income = ₹5,00,000. Tax = ₹12,500. Rebate u/s 87A = ₹12,500. Tax payable = Nil.
### Example 4
Example 4 (Restriction): Under new regime, Mrs. P has total income of ₹11,50,000 including ₹2,00,000 LTCG u/s 112A. Rebate is NOT available on tax payable on the ₹2,00,000 LTCG portion.
⚠️ Common exam mistakes
Granting rebate u/s 87A under the new regime on tax payable on LTCG u/s 112A — explicitly not allowed.
Forgetting marginal relief when income is just above ₹12,00,000 under the new regime.
Allowing the rebate to non-residents — only resident individuals are eligible.
Confusing the limits between old (₹5L / ₹12,500) and new (₹12L / ₹60,000) regimes.
Bare-Act text Section 87A · Income-tax Act, 1961 · click to expand
Sec 87A: An assessee, being an individual resident in India, whose total income does not exceed [specified amount], shall be entitled to a deduction, from the amount of income-tax (as computed before allowing the deductions under this Chapter) on his total income with which he is chargeable for any assessment year, of an amount equal to hundred per cent of such income-tax or an amount of [specified rebate], whichever is less.