Section 87A Tax Rebate
Section 87A is a tax rebate that lets low and middle-income earners in India reduce their income tax bill — sometimes to zero. Under the new tax regime, if your income is up to ₹12 lakh, you pay no tax at all. Under the old regime, the limit is lower. This rebate directly saves you thousands of rupees every year at filing time.
A salaried employee earning ₹11.5 lakh a year under the new tax regime saves roughly ₹11,000–₹13,000 in tax because of Section 87A — that's more than 6 months of a typical Mumbai family's grocery bill.
If your taxable income falls within the eligible limit, Section 87A can reduce your entire income tax bill to zero — putting up to ₹60,000 back in your pocket every financial year.
Key Takeaways
If you file under the new tax regime and your total income (after standard deduction) is ₹12 lakh or below, claim Section 87A to bring your tax liability to zero — make sure your ITR form correctly applies this rebate before you submit.
Under the old tax regime, the Section 87A rebate applies only if your total income is ₹5 lakh or below, giving you a maximum rebate of ₹12,500 — if you earn more than ₹5 lakh and use the old regime, you get no benefit from this section.
Special income like long-term capital gains (LTCG) taxed under Section 112A — such as gains from equity mutual funds or stocks — is NOT eligible for Section 87A rebate, so factor this in while planning your investments and tax liability.
Every year when tax season arrives, millions of Indian salaried employees and small business owners scramble to figure out how much tax they owe. But a quiet provision in the Income Tax Act — Section 87A — can legally wipe out your tax bill entirely, and many people miss it simply because they don't know it exists.
Here's how it works. Section 87A is a rebate — not a deduction — which means it directly reduces the tax you owe, not just your taxable income. Under the new tax regime (which is now the default for most taxpayers), if your net taxable income does not exceed ₹12 lakh in a financial year, your entire income tax liability is reduced to zero through this rebate. The government extended this limit in the Union Budget 2025, making it one of the most significant middle-class tax reliefs in recent years.
Under the older tax regime, the rules are stricter. The rebate is available only if your total income is ₹5 lakh or less, and the maximum rebate you can claim is ₹12,500. So if you're earning above ₹5 lakh and still choosing the old regime hoping for deductions under 80C or HRA, you need to do the math carefully — the new regime's ₹12 lakh zero-tax threshold may actually leave more money in your hands.
One important catch: special incomes like long-term capital gains from equity mutual funds or shares (taxed under Section 112A) are excluded from the Section 87A rebate. If you've booked LTCG above ₹1.25 lakh this year, those gains will still attract tax even if your salary income is within the rebate limit. Plan your redemptions accordingly. You can use GoCredit's financial planning tools to model your total tax outgo before filing.
Pro tip: Always verify that your ITR pre-filled form has correctly applied the Section 87A rebate before you submit. Some taxpayers with mixed income types have reported the rebate not being auto-applied — a quick check could save you thousands.
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