Section 87A Rebate FY 2026 — ₹60,000 Rebate, Zero Tax up to ₹12 Lakh & ₹12.75L for Salaried
Updated: 3 June 2026 | FY 2025-26 / Tax Year 2026-27 | Income-tax Act, 2025
Section 87A rebate for FY 2025-26 (Tax Year 2026-27): ₹60,000 under the new regime for net taxable income up to ₹12 lakh — making income effectively tax-free. Salaried employees earning up to ₹12.75 lakh gross pay zero tax (₹12.75L − ₹75K standard deduction = ₹12L → ₹60K tax → ₹60K rebate → ₹0). Old regime rebate: ₹12,500 for income ≤ ₹5L. Rebate not available on STCG/LTCG at special rates.
₹60,000
Maximum Section 87A rebate under new regime for FY 2025-26 / Tax Year 2026-27.
Tax on ₹12L income under new regime = ₹60,000. The rebate exactly cancels this → zero tax. No investments, no deductions needed.
Tax on ₹12L income under new regime = ₹60,000. The rebate exactly cancels this → zero tax. No investments, no deductions needed.
How Section 87A Rebate Works — Step by Step
| Step | Non-Salaried (₹12L) | Salaried (₹12.75L Gross) |
|---|---|---|
| Gross Income | ₹12,00,000 | ₹12,75,000 |
| Standard Deduction | — | − ₹75,000 |
| Net Taxable Income | ₹12,00,000 | ₹12,00,000 |
| Tax on Slabs (new regime) | ₹60,000 | ₹60,000 |
| Section 87A Rebate | − ₹60,000 | − ₹60,000 |
| Tax After Rebate | ₹0 | ₹0 |
| Health & Education Cess (4%) | ₹0 | ₹0 |
| Total Tax Payable | ₹0 | ₹0 |
Section 87A Rebate — New Regime vs Old Regime Comparison
| Parameter | New Regime | Old Regime |
|---|---|---|
| Maximum Rebate Amount | ₹60,000 | ₹12,500 |
| Income Eligibility Ceiling | ≤ ₹12,00,000 | ≤ ₹5,00,000 |
| Effective Tax-Free Income | ₹12,00,000 | ₹5,00,000 |
| Salaried Zero-Tax Ceiling | ₹12,75,000 | ₹5,50,000 |
| Available on STCG (Sec 111A)? | No | No |
| Available on LTCG (Sec 112A)? | No | No |
Section 87A — What Incomes are Excluded from Rebate?
The Section 87A rebate cannot reduce tax on the following special-rate incomes, even if total income is below ₹12 lakh:
| Income Type | Section | Tax Rate | 87A Rebate Available? |
|---|---|---|---|
| STCG on listed equity/equity MF | Section 111A | 20% | No |
| LTCG on listed equity/equity MF | Section 112A | 12.5% (above ₹1.25L) | No |
| Lottery, horse racing winnings | Section 115BB | 30% | No |
| Regular salary/business/FD income | Normal slabs | Slab rates | Yes (if total ≤ ₹12L) |
Frequently Asked Questions
What is the Section 87A rebate for FY 2025-26 (Tax Year 2026-27)?
Section 87A rebate for FY 2025-26 (also called Tax Year 2026-27 under the Income-tax Act, 2025) is ₹60,000 under the new regime for total income ≤ ₹12 lakh. This completely eliminates income tax for those earning up to ₹12 lakh. Under the old regime, the 87A rebate remains ₹12,500 for income ≤ ₹5 lakh. Note: The rebate cannot be applied against tax on special rate incomes like STCG (Section 111A) or LTCG (Section 112A).
How does the ₹60,000 Section 87A rebate work?
The 87A rebate works by directly reducing your computed income tax to zero (or by up to ₹60,000). Example: Income ₹12 lakh (new regime) → tax on slabs = ₹60,000 → apply 87A rebate ₹60,000 → net tax = ₹0 → add 4% cess = ₹0 total. For salaried: gross ₹12.75L − ₹75K standard deduction = ₹12L net taxable → same calculation → zero tax. The rebate is automatically applied when filing ITR — no separate declaration needed.
Is Section 87A rebate available on capital gains or special rate income?
No. Section 87A rebate is NOT available on: (1) Short-term capital gains under Section 111A (equity shares/equity MF units taxed at 20%); (2) Long-term capital gains under Section 112A (equity: 12.5% above ₹1.25L threshold); (3) Any other income taxed at special rates. Even if your total income is below ₹12 lakh but includes STCG/LTCG, the rebate does not apply to that portion of tax. Regular income below ₹12L can still qualify for rebate on the non-special-rate portion.
What is the difference between old regime and new regime Section 87A rebate for FY 2025-26?
New regime (FY 2025-26 / Tax Year 2026-27): 87A rebate up to ₹60,000; applicable if net taxable income ≤ ₹12,00,000; zero tax on entire ₹12L income. Old regime: 87A rebate up to ₹12,500; applicable if net taxable income ≤ ₹5,00,000; reduces tax to nil for income ≤ ₹5L. The new regime rebate is significantly more generous, making new regime the preferred choice for individuals with limited deductions.
If my income is exactly ₹12 lakh or ₹12.01 lakh, how does 87A rebate apply?
At exactly ₹12,00,000 (new regime): tax = ₹60,000 → 87A rebate = ₹60,000 → net tax = ₹0. Zero tax. At ₹12,00,001 (just ₹1 above): 87A rebate is completely unavailable → full tax of ₹60,000 + 15 paise (on ₹1 at 15%) is payable with no rebate. This cliff-edge means income just above ₹12L results in much higher effective tax. Marginal relief provisions are available to prevent gross anomaly at ₹50L, ₹1Cr thresholds, but there is NO marginal relief at the 87A ₹12L boundary.
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