Rebate U/S 87A For FY 2025-26(AY 2026-27): A detailed review
The Finance Budget 2025 has been a spectacular one for all middle-class taxpayers. There has been a significant increase in the tax rebate under Section 87A. This rebate provides significant relief.
It is designed for individual taxpayers in India. This provision has been instrumental in reducing the tax burden on middle-class taxpayers. It allows eligible individuals to claim a rebate from their tax liability.
As the financial year (FY) 2025-26 approaches, it’s essential to understand several aspects. These aspects include the rules. They encompass the eligibility criteria and benefits linked to the rebate under Section 87A for Assessment Year (AY) 2026-27.
Rebate U/S 87A For FY 2025-26(AY 2026-27): What is Section 87A of the Income Tax Act?
Section 87A was introduced to offer tax relief to individual taxpayers. It allows them to claim a rebate on their tax liability. This rebate effectively reduces the tax payable. It may even eliminate taxes for eligible taxpayers whose total taxable income falls below a specified threshold.
The rebate is deducted directly from the tax payable. The maximum amount of rebate is subject to changes announced in the annual Union Budget.
Rebate U/S 87A For AY 2026-27: Income Tax Slabs for FY 2025-26 (AY 2026-27):
New Tax Regime for FY 2025-26(AY 2026-27)
| Income Slab (Rs.) | Tax Rate |
|---|---|
| 0 – 4,00,000 | Nil |
| 4,00,001 – 8,00,000 | 5% |
| 8,00,001 – 12,00,000 | 10% |
| 12,00,001 – 16,00,000 | 15% |
| 16,00,001 – 20,00,000 | 20% |
| 20,00,001 – 24,00,000 | 25% |
| Above 24,00,001 | 30% |
Old Tax Regime for FY 2025-26(AY 2026-27)
| Income Slab (Rs.) | Tax Rate |
| 0 – 2,50,000 | Nil |
| 2,50,001 – 5,00,000 | 5% |
| 5,00,001 – 10,00,000 | 20% |
| Above 10,00,000 | 30% |
Rebate U/S 87A For FY 2025-26 (AY 2026-27): Who is eligible for 87A Rebate?
To claim the rebate U/S 87A for FY 2025-26 (AY 2026-27), taxpayers must meet the following conditions:
1. Residential Status: The taxpayer must be a resident individual in India. Non-resident individuals (NRIs) are not eligible for this rebate.
2. Total Taxable Income: The total taxable income under the new tax regime must not exceed Rs. 12,00,000 and for old tax regime (after deductions under sections like 80C, 80D, etc.) it must not exceed Rs. 5,00,000 for the relevant financial year.
3 . Tax Liability: The rebate is available only up to the total tax payable before adding any cess or surcharge.
How is Section 87A Rebate Calculated?/Rebate U/S 87A For FY 2025-26 amount?
The rebate amount under Section 87A for FY 2025-26 is as follows:
1. Maximum rebate allowed: The Fin Min mentioned her aim to provide relief in her Budget speech. She targets middle-class taxpayers. The rebate amount has been increased from the existing Rs. 25,000 to Rs. 60,000.
2. Applicability: Rebate U/S 87A for FY 2025-26 applies to individuals with taxable income up to Rs. 12,00,000.
This implies that if your taxable income is Rs. 12,00,000 or less, you can claim a rebate of up to Rs. 60,000, thereby reducing your tax liability to zero.
For salaried persons, this taxable income limit is Rs. 12,75,000. One will get a standard deduction of Rs. 75,000 if their earning includes income from salary.
87A Rebate in New Tax Regime:
The new tax regime was introduced in the Budget 2020. It was made a default regime in the Budget 2023. It is now crucial for taxpayers to understand how the rebate under Section 87A applies.
The new tax regime offers lower tax rates but limited deductions and exemptions. Nevertheless, the rebate remains applicable if the taxable income is up to Rs. 12,75,000, ensuring significant tax relief. The rebate quantum has been increased to Rs. 60,000 in Budget 2025 from an earlier limit of Rs. 25,000.
Calculate Your Income Tax Liability Below:
Rebate U/S 87A for FY 2025-26 for Senior Citizens:
Senior citizens (those aged 60 years and above but below 80 years) are eligible for the same rebate of Rs. 75,000 under Section 87A, provided their taxable income does not exceed Rs. 12,75,000. Super senior citizens (aged 80 years and above) get the same rebate advantage as the salaried persons.
This applies if their taxable income does not exceed Rs. 12,75,000 in a year, including income from all sources but not income from capital gains.
Rebate U/S 87A for FY 2025-26 Calculator:
We have prepared an automatic rebate calculator in Excel. You just need to put your income details. Add any deductions if applicable. This Excel-based calculator will automatically calculate your eligible rebate amount. It will also calculate your tax liability under both tax regimes.
You should not provide the applicable tax regimes. The calculator will automatically choose the most beneficial tax regime for you based on your total earnings.
Rebate U/S 87A for FY 2025-26 Calculator: For New Tax Regime
Scenario 1: Taxable Income of Rs. 12,75,000 (New Tax Regime)
Here’s the calculation in the table below:
| Particulars | Amount (Rs.) | Remarks |
|---|---|---|
| Gross Taxable Income | 12,75,000 | |
| Standard Deduction | 75,000 | For Salaried/Pensioners |
| Net Taxable Income | 12,00,000 | |
| Income up to Rs. 4,00,000 | Nil | Tax-exempt |
| Income from Rs. 4,00,001 to Rs. 8,00,000 | 20,000 | 5% of Rs. 4,00,000 |
| Income from Rs. 8,00,001 to Rs. 12,00,000 | 40,000 | 10% of Rs. 4,00,000 |
| Total Tax before Rebate | 60,000 | |
| Rebate U/S 87A | 60,000 | Maximum limit Rs. 60,000 |
| Tax Payable after Rebate | 0 |
- Tax Calculation:
- Net Taxable Income : Rs.12,00,000(12,75,000-75,000) (Standard Deduction for Salaried/ Pensioners)
- Income up to Rs. 4,00,000: Nil
- Income from Rs. 4,00,001 to Rs. 8,00,000: 5% of Rs. 4,00,000 = Rs. 20,000
- Income from Rs. 8,00,001 to Rs. 12,00,000: 10% of Rs. 4,00,000 = Rs. 40,000
- Total Tax before rebate = Rs. 60,000
- Rebate U/S 87A: Rs. 60,000 (since the total tax is less than the highest rebate limit of Rs. 60,000)
- Tax payable after rebate: Rs. 0(Nil)
Scenario 2: Taxable Income of Rs. 20,00,000 (New Tax Regime)
- Tax Calculation:
- Net Taxable Income Rs. 19,25,000 after Standard Deduction of Rs. 75,000
- Income up to Rs. 4,00,000: Nil
- Income from Rs. 4,00,001 to Rs. 8,00,000: 5% of Rs. 4,00,000 = Rs. 20,000
- Income from Rs. 8,00,001 to Rs. 12,00,000: 10% of Rs. 4,00,000 = Rs. 40,000
- Income from Rs. 12,00,001 to Rs. 16,00,000: 15% of Rs. 4,00,000 = Rs. 60,000
- Income from Rs. 16,00,001 to Rs. 19,25,000: 20% of Rs. 3,25,000 = Rs. 65,000
- Total Tax before rebate = Rs. 1,85,000
- Rebate U/S 87A: Not applicable (since taxable income exceeds Rs. 12,75,000)
- Tax payable after rebate: Rs. 1,85,000
| Income Range (Rs.) | Tax Rate | Tax Amount (Rs.) |
|---|---|---|
| Up to Rs. 4,00,000 | Nil | 0 |
| Rs. 4,00,001 to Rs. 8,00,000 | 5% | 20,000 |
| Rs. 8,00,001 to Rs. 12,00,000 | 10% | 40,000 |
| Rs. 12,00,001 to Rs. 16,00,000 | 15% | 60,000 |
| Rs. 16,00,001 to Rs. 19,25,000 | 20% | 65,000 |
| Total Tax Before Rebate | 1,85,000 | |
| Rebate U/S 87A | Not Applicable | 0 |
| Tax Payable After Rebate | 1,85,000 |
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