Key Highlights

Section 87A of the Income Tax Act gives a direct rebate of ₹60,000 on an annual income of up to ₹12,00,000.
This was introduced to lower the taxes and encourage people to either save more or spend more.
The rebate is applied automatically in the ITR, but timely filing is essential to claim refunds when excess TDS was deducted.

Section 87A of the Income Tax Act gives a rebate (refund) on taxes to individuals residing in the country. As per the new regime (FY 2025-26), individuals earning income up to ₹7,00,000 can receive a rebate of ₹25,000. For income up to ₹12,00,000, tax relief of ₹60,000 is provided.

For example, Deepika earned ₹4,95,000 and her tax liability was ₹20,000 (5% on ₹4,00,000). Section 87A rebate reduced her tax to zero as it offered the rebate of ₹20,000 (less than the maximum rebate of ₹60,000).

The table below summarises the finances involved in the example

Particulars	Amount (₹)
Total Income (as per Form 16)	4,95,000
Tax Before Rebate	20,000
Section 87A Rebate (max ₹60,000)	20,000
Health & Education Cess	4% (the above calculation is done by excluding cess)
Final Tax Payable	0

Deepika saved ₹20,000 that year. She could either invest or spend accordingly. In both cases, it’s the Indian economy that is getting affected positively. Section 87A of the Income Tax Act has allowed individuals to save on taxes. However, there have been changes in the act, so let’s discuss the amendments made in the blog.

Section 87A: Introduction of the Income Tax Act

Section 87A of the Income Tax Act gives you a stellar rebate if you're a resident individual with a total income below a threshold. Under the old tax regime, if your taxable income (after deductions) is ₹5,00,000 or less, you get a 100% rebate on your tax liability, or up to ₹12,500, whichever is lower. From April 1, 2024, under the new regime, the rebate applies for income up to ₹7,00,000, and the cap is ₹25,000.

Here’s an example: suppose your taxable income is ₹6,00,000 under the new regime, you calculate ₹24,000 tax before cess. Section 87A gives you a rebate of ₹24,000 (since it’s less than the cap of ₹25,000), so your tax drops to zero before cess .

So here’s how the process will go:

Earn under the limit.
Compute tax before applying health and education cess (4%).
Apply 87A rebate (actual tax or cap)
Pay ₹0 in tax.

Importance of Section 87A of the Income Tax Act

Section 87A has undergone multiple changes. The older regime is not followed, and there are additions to the new regime. With the help of a table, we have summarised all three cases.

Tax Regime	Income Limit for Rebate	Maximum Rebate (₹)	Example: Tax Before Rebate (₹)	Rebate (₹)	Final Tax Payable
Old Regime	₹5,00,000	₹12,500	₹12,400 (on ₹5,00,000 income)	₹12,400	₹0
New Regime	₹7,00,000	₹25,000	₹23,400 (on ₹6.8,00,000 income)	₹23,400	₹0
For FY 2025-26	₹12,00,000	₹60,000	₹40,000 (on ₹12,00,000 income)	₹40,000 (on ₹12,00,000 income)	₹0

This means that under the new regime, income up to ₹12,00,000 is not taxed. This calculation is done before applying 4% cess on health and education.

Objectives of Section 87A of the Income Tax Act

There is more than one reason behind the introduction and amendment of Section 87A of the Income Tax Act. We have discussed the major objectives in the table given below.

Objective	Explanation
Provide tax relief	Helps reduce or eliminate the tax burden for eligible resident individuals.
Support low/mid-income taxpayers	Targets those earning up to ₹5,00,000 (old) / ₹12,00,000 (new) annually
Simplify compliance	No forms or investments required, rebate is auto-applied while filing ITR
Increase disposable income	Let individuals retain more of their earnings.

Overall, the government wants the common man (earning up to ₹12,00,000) to retain more of their earnings. With the money saved on taxes, the individual can either invest or spend on various commodities. This expenditure will have a positive impact on the economy.

TDS Rate Under Section 87A of the Income Tax Act

Section 87A of the Income Tax Act gives relief to taxpayers earning an annual income of up to ₹12,00,000. It offers a rebate on the final tax liability. It reduces the overall tax burden but does not directly impact TDS deductions. In the table below, we have given you the overview of the TDS rate under Section 87A of the Income Tax Act.

Particulars	Details
Purpose of Section 87A	Provides an income tax rebate to eligible resident individuals
Applies to TDS?	No, Section 87A affects final tax liability, not TDS deduction
TDS Deduction Basis	Based on estimated income & applicable slab rates (Section 192, etc.)
If excess TDS is deducted	Can be claimed as a refund in the Income Tax Return (ITR)
Income Threshold (Old Regime)	Up to ₹5,00,000 - Max rebate ₹12,500
Income Threshold (New Regime, FY24–25)	Up to ₹7,00,000 - Max rebate ₹25,000

Let’s understand with an example:

Ravi has a taxable income of ₹4,80,000 under the old tax regime. His tax before rebate is ₹20,000 (5% of ₹4,00,000, which is the taxable income). After applying Section 87A, he gets a rebate of ₹20,000 because it is less than the ₹60,000 cap. That means the payable tax is ₹0 (before cess).

However, since his employer deducted ₹5,000 TDS, Ravi will be eligible for a refund of ₹5,000 when he files his ITR. The table given below gives a summary of the example given above.

Detail	Amount (₹)
Taxable Income (New Regime)	₹4,80,000
Section 87A Rebate (max ₹60,000)	₹60,000
Net Tax Payable (before cess)	₹0
TDS Deducted by Employer	₹5,000
Refund Claimable While Filing ITR	₹5,000

This shows how Section 87A can significantly cut down tax liability. Moreover, it also gives a refund on the TDS applied under Section 192 of the Income Tax Act..

Bonus: TDS might still be deducted even if you’re eligible for a rebate under Section 87A. But don’t worry, once you file your return, you’ll get that extra tax amount back as a refund.

Exemption Under Section 87A of the Income Tax Act

Section 87A of the Income Tax Act gives exemption from paying taxes (before cess) for individuals earning up to max ₹12,00,000 annually. Though there were amendments made in August 2025. The table below gives an overview of the act and the changes introduced.

Key Point	Explanation
Who is eligible	Only resident individuals (excluding HUFs, companies)
Limit under the old regime	Income ≤ ₹ 5,00,000 - rebate up to ₹12,500
Limit under the new regime (FY2024-25)	Income ≤ ₹ 7,00,000 - rebate up to ₹25,000
Limit under the new regime (FY2015-26)	Income ≤ ₹ 12,00,000 - rebate up to ₹60,000
What does it apply to	Reduces tax liability (including slab rates, LTCG under Section 112, STCG under Section 111A)
Claim method	Automatically adjusted in ITR, no separate form or investment needed

The example given below will make the table more understandable.

Taxable income: ₹6,00,000
Tax before rebate: ₹20,000 (5% on ₹4–8,00,000)
Section 87A rebate: ₹20,000 (as it’s less than the ₹60,000 cap) .
Final tax payable: ₹0 (before cess).

So, if you earn up to ₹5,00,000 (old) or ₹12,00,000 (new), Section 87A lets you save on your tax liability automatically. You don’t need to make any investments or indulge in paperwork. However, don’t forget to file your ITR.

Due Date and Compliance Requirement

It is your duty to timely file the Income Tax Returns. If you fail to do so, you cannot claim benefits like the Section 87A rebate. The law sets clear deadlines, and missing them can be a loss to the savings you could make that year. We have created a table that summarises the deadlines and compliance requirements.

Compliance Item	Details
Original ITR filing due date (FY 2024–25)	July 31, 2025
Extended deadline for belated/revised return	September 15, 2025
Post-Sept 15 filing option	Only ITR-U, which does not allow refunds for 87A excess TDS
Who does it apply to	Resident individuals making an eligible claim under Section 87A

Once the extended due date passes, only ITR-U can be filed, which does not allow Section 87A refunds. So, stay compliant with deadlines and don’t lose out on your tax relief.

Did you know that the ITR software was updated to allow taxpayers to manually claim the Section 87A rebate? This happened even if the system’s auto-fill logic excluded them due to special-rate income like STCG. This patch came after eligible taxpayers were being wrongly denied the rebate in the first round of filings for FY 2023–24 (AY 2024–25).

Conclusions

Section 87A of the Income Tax Act states that individuals earning up to ₹12,00,000 can claim a tax refund of up to ₹60,000. This was introduced in August 2025. The older regime had set the annual income limit of ₹7,00,000 \and the maximum capped amount was ₹25.000.

Because of this act, people can invest more and can also spend on lifestyle, education, etc. All you have to do is send in your return on time, and the relief will be applied immediately!

Frequently Asked Questions

Do NRIs qualify for Section 87A?
No, the rebate is for resident individuals only; NRIs are not eligible.

If my final tax becomes zero after 87A, do I still need to pay advance tax?
If the expected final liability is zero (after considering the rebate), no advance tax is required; compute the projected tax before deciding.

Does Section 87A reduce surcharge or cess?
The rebate applies to tax (generally before cess); cess (4%) is charged separately on net tax as applicable.

How does Section 87A interact with special-rate incomes (like certain capital gains)?
Special-rate incomes may affect overall taxable income; you must compute tax including such items and then apply the rebate if eligible — if system auto-excludes, claim manually on ITR.

Can married couples or joint property owners combine incomes to claim 87A?
No, the rebate is individual. Each person files their own ITR and may claim 87A only based on their individual taxable income.

If TDS is deducted at a higher rate (no PAN), can I still get a refund under 87A?
Yes, file ITR claiming the rebate; excess TDS can be refunded after assessment, subject to verification.

Do senior citizens get any special treatment under 87A?
No extra rebate under 87A specifically for seniors; eligibility still depends on taxable income and residency status.

Other News Pages
Section 43B of the Income Tax Act	Section 206CL of the Income Tax Act	Section 139(4) of the Income Tax Act	Section 115AD of the Income Tax Act
Section 87A of the Income Tax Act	Section 111A of the Income Tax Act	Section 44AA of the Income Tax Act	Section 194A of the Income Tax Act
Section 197 of the Income Tax Act	Section 194I of the Income Tax Act	Section 269ST of the Income Tax Act	Section 28 of the Income Tax Act
Section 156 of the Income Tax Act	Section 143(2) of the Income Tax Act	Section 194J of the Income Tax Act	Section 194BA of the Income Tax Act