SATELLITE PAGE starNEW REGIME DEFAULT

Section 87A Rebate — Why ₹12L Pays Zero Tax

The rebate that makes ₹12,00,000 the real zero-tax threshold in the New Regime. Understand the marginal relief band that protects income between ₹12L and ₹12.75L.

What is Rebate 87A?

Section 87A is a tax rebate — not a deduction. It directly reduces your tax liability to zero if your taxable income falls within the threshold. (Official CBDT resident-benefits table for AY 2026-27: ₹60,000 rebate when TI ≤ ₹12L under s.115BAC(1A).)

NEW REGIME starNEW REGIME DEFAULT

₹0 tax if TI ≤ ₹12L

Rebate: ₹60,000. If your taxable income is up to ₹12,00,000, you pay zero income tax. The ₹60,000 rebate covers the full slab tax (0 + 20K + 40K = 60K at ₹12L).

OLD REGIME

₹0 tax if TI ≤ ₹5L

Rebate: ₹12,500. Threshold is ₹5L — much weaker. Only covers 10K slab tax + 2,500 cess equivalent.

check_circle How the New Regime 87A Works

At ₹12L taxable income, your slab tax is ₹60,000 (0% on first 4L + 5% on next 4L = 20K + 10% on next 4L = 40K). The rebate of ₹60,000 wipes it out completely. Both regimes apply 4% health & education cess on top of the tax — but if tax is zero, cess is also zero.

Marginal Relief Band

Marginal relief ensures that earning slightly more than ₹12L doesn't suddenly cost you a large tax bill. Between ₹12L and approximately ₹12,75,588, your tax is capped at the amount by which your income exceeds ₹12L.

The Marginal Relief Rule

If Taxable Income > ₹12,00,000 and Tax(TI) > (TI − ₹12,00,000):
Tax = (TI − ₹12,00,000)

In plain English: your tax is capped at "how much you earned above ₹12L". Earning ₹12.5L means tax is capped at ₹50,000 (not the ₹67,500 slab tax would suggest).

Visual: The Transition Band

₹0 — ₹12,00,000

ZERO TAX

₹12,00,000 — ~₹12,75,588

MARGINAL RELIEF

Tax = Income above ₹12L. Earning ₹75K more ≈ ₹75K more tax.

₹12,75,588+

NORMAL SLAB RATES

warning UPPER BOUND — NEEDS VERIFICATION

The marginal relief upper bound is approximately ₹12,75,588. This is where the slab tax (₹62,588 before cess) minus the ₹60,000 rebate equals ₹12,75,588 − ₹12,00,000 = ₹75,588. warningESTIMATE

[TO VERIFY] Exact upper bound pending CBDT notification. Secondary sources cite ~₹12,75,588. The figure assumes no other income adjustments.

Income-to-Tax Mapping

Exact tax liability under the New Regime for FY 2026-27. Includes 87A rebate and marginal relief where applicable. Cess (4%) added on top.

Taxable Income	Slab Tax	87A / Relief	After Rebate	+ 4% Cess	Total Tax
₹12,00,000	₹60,000	−₹60,000 (rebate)	₹0	₹0	₹0
₹12,10,000	₹61,500	Marginal relief	₹10,000	₹400	₹10,400
₹12,25,000	₹63,750	Marginal relief	₹25,000	₹1,000	₹26,000
₹12,50,000	₹67,500	Marginal relief	₹50,000	₹2,000	₹52,000
₹12,75,000	₹71,250	None (71.25K < 75K)	₹71,250	₹2,850	₹74,100
₹13,00,000	₹75,000	None	₹75,000	₹3,000	₹78,000
₹14,00,000	₹90,000	None	₹90,000	₹3,600	₹93,600
₹15,00,000	₹1,05,000	None	₹1,05,000	₹4,200	₹1,09,200
₹16,00,000	₹1,20,000	None	₹1,20,000	₹4,800	₹1,24,800
₹20,00,000	₹2,00,000	None	₹2,00,000	₹8,000	₹2,08,000

check_circle Slab Breakdown Reference

0–4L: 0% → 4–8L: 5% → 8–12L: 10% → 12–16L: 15% → 16–20L: 20% → 20–24L: 25% → 24L+: 30%. Rebate 87A (₹60K) applies only if TI ≤ ₹12L. Marginal relief caps tax at (TI − 12L) between ₹12L and ~₹12,75,588.

Quick Calculator

Gotchas

warning TAXABLE INCOME IS AFTER STANDARD DEDUCTION

The ₹12L threshold applies to taxable income, not gross salary. With a ₹75,000 Standard Deduction in the New Regime, you need ₹12,75,000 gross salary to hit ₹12L taxable. Your actual zero-tax gross salary threshold is ₹12.75L, not ₹12L.

warning REBATE IS ON TAX, NOT INCOME

Rebate 87A reduces your tax liability to zero — it does not reduce your taxable income. This matters for marginal relief calculations: the slab tax is computed first, then the rebate is applied. Don't confuse it with a deduction like 80C.

info OLD REGIME 87A IS WEAKER

Old Regime 87A gives a rebate of only ₹12,500 and the threshold is ₹5L (not ₹12L). If your taxable income exceeds ₹5L in the Old Regime, there is no rebate — you pay full slab tax. The New Regime 87A is over 4× more generous in threshold and nearly 5× in rebate amount.

warning 87A DOES NOT APPLY TO SPECIAL RATE INCOME

The rebate only covers slab-rate tax. Income taxed at special rates — STCG u/s 111A (20%), LTCG u/s 112/112A (12.5%), and winnings u/s 115BB (30%) — is completely outside the 87A threshold. If your total income is ₹14L but ₹2L is LTCG under 112, your slab-rate tax is computed only on ₹12L. The ₹2L LTCG is taxed separately at 12.5% with no rebate. The ₹12L threshold for 87A excludes special rate income. CBDT Circular 13/2025.

info 87A IS ONLY FOR RESIDENT INDIVIDUALS

Non-residents, HUFs, companies, firms, and AOPs/BOPs cannot claim 87A. Only resident individuals qualify. If you're an NRI filing ITR-2 or ITR-3, the rebate is not available regardless of your income level. The threshold and rebate amounts are irrelevant for non-residents.

Run Your Numbers

Use our income tax calculator to see whether rebate 87A zeroes out your tax.

Income Tax Calculator →