Tax Rebate Under 87A
Definition
A rebate for resident individuals where the entire tax liability is waived if taxable income is ≤ ₹7 Lakh (new regime) or ≤ ₹5 Lakh (old regime). This effectively means zero tax for income up to these limits.
Why is Tax Rebate Under 87A Important?
Navigating the Indian tax system requires a clear understanding of terms like Tax Rebate Under 87A. With the introduction of the new income tax regime alongside the old one, taxpayers must evaluate their deductions, exemptions, and tax brackets carefully. This concept is a key component in optimizing your tax liabilities under the Income Tax Act and GST framework.
Proper tax planning using this metric can help individuals and businesses maximize their take-home income while remaining fully compliant with government regulations. We provide free tax calculators to help you estimate these figures accurately and make informed decisions before filing your returns.
What is Tax Rebate Under Section 87A?
Section 87A provides a rebate (direct reduction in tax payable) for resident individuals whose total taxable income is below a specified threshold. It effectively makes income up to the threshold tax-free.
Section 87A Limits
| Regime | Income Threshold | Maximum Rebate |
|---|---|---|
| New Regime | Up to ₹7,00,000 | ₹25,000 |
| Old Regime | Up to ₹5,00,000 | ₹12,500 |
How It Works — Example
Under the new regime, if your taxable income is ₹6,50,000:
- Tax on ₹6,50,000 = ₹22,500
- Section 87A rebate = ₹22,500
- Net tax payable = ₹0
But if taxable income is ₹7,10,000, the full tax is payable (no rebate), resulting in a significant jump. This is why staying at or below ₹7L is highly beneficial.