Income Tax Rebate 87A Calculator

What Is the Income Tax Rebate Under Section 87A?

Section 87A of the Income-tax Act provides a rebate from income tax to qualifying resident individuals. It reduces the calculated tax liability when taxable income and other statutory conditions are satisfied. It is different from a deduction because it operates after taxable income and slab tax have been calculated.

The Income Tax Rebate 87A Calculator applies the relevant rebate thresholds for the selected tax regime. It helps explain why two individuals with similar gross earnings can have different final tax liabilities after deductions, standard deductions, and eligibility conditions.

For FY 2026–27, the new regime generally permits a regular rebate of up to ₹60,000 for eligible resident individuals with qualifying total income not exceeding ₹12 lakh. Under the old regime, the familiar rebate limit is ₹12,500 when total income does not exceed ₹5 lakh.

These are different tax treatments, not two rebates that can be combined. The old regime and new regime have different tax slabs, deduction rules, and rebate thresholds. You should calculate your taxable income under the chosen regime before applying the relevant rebate.

Five essential facts about Section 87A

1. The rebate is intended for qualifying resident individuals, not companies or partnership firms.
2. Eligibility is determined using taxable total income, not simply annual CTC or gross salary.
3. The old and new regimes have different income thresholds and rebate limits.
4. The rebate cannot exceed the eligible income-tax liability against which it is allowed.
5. Marginal relief may apply just above the new-regime ₹12 lakh threshold, subject to statutory conditions.

The Income Tax Rebate 87A Calculator presents the estimated rebate separately from the final tax. This makes it easier to understand the difference between the relief received and the amount of income tax that remains payable.

Income Tax Rebate 87A Calculator Eligibility Rules

Eligibility starts with residential status. Section 87A generally applies to a resident individual satisfying the applicable income conditions. A nonresident individual cannot assume eligibility merely because their taxable income falls below the monetary threshold.

The next step is calculating total income after permitted deductions. For a salaried person under the new regime, the ₹75,000 standard deduction can reduce salary income before the rebate threshold is assessed. Other categories of income may not qualify for that salary deduction.

Eligibility under the new tax regime

For FY 2026–27, an eligible resident individual can generally receive a rebate of up to ₹60,000 against qualifying slab-rate tax when total income is no more than ₹12 lakh. This does not mean every person with ₹12 lakh of gross income has the same tax calculation.

A salaried person with ₹12.75 lakh of eligible gross salary, no other taxable income, and a ₹75,000 standard deduction may have ₹12 lakh of taxable income. In that simplified case, the rebate can eliminate the ₹60,000 slab tax on ordinary income.

Eligibility under the old tax regime

The old-regime rebate is limited to ₹12,500 for qualifying resident individuals whose total income does not exceed ₹5 lakh. A person with total income just above ₹5 lakh does not receive the same old-regime rebate merely because the difference is small.

Old-regime deductions may help reduce total income to the eligibility threshold. However, each deduction has its own requirements and limits. The Income Tax Rebate 87A Calculator accepts a user-entered deduction amount rather than assuming everyone can claim the maximum.

Who needs a more detailed tax calculation?

Individuals with capital gains taxed at special rates, lottery winnings, virtual digital asset income, surcharge exposure, or other exceptional income should not rely on this simplified result. The rebate restrictions for special-rate income must be considered separately, and the tool deliberately does not calculate those categories.

How to Use the Income Tax Rebate 87A Calculator

Begin with your annual income and identify the type of income you receive. Select the tax regime and confirm your residential status. If applicable, enter only deductions that you are eligible to claim under the selected regime.

The Income Tax Rebate 87A Calculator then subtracts the appropriate salary standard deduction, calculates ordinary taxable income, applies progressive slab rates, and determines whether the relevant rebate or marginal relief is available.

Step-by-step calculation

1. Enter annual gross income in Indian rupees.
2. Choose the old or new income-tax regime.
3. Select salary/pension or other ordinary income.
4. Confirm whether you are a resident individual.
5. Add any eligible deductions supported by your records.
6. Calculate tax before rebate, Section 87A relief, cess, and final estimated tax.

The basic Section 87A formula

For an eligible individual within the regular rebate threshold, the rebate is the smaller of the qualifying income tax and the maximum rebate permitted under the chosen regime.

Under the new regime, the regular rebate calculation is the lesser of eligible slab tax and ₹60,000, provided the qualifying income does not exceed ₹12 lakh. Under the old regime, it is the lesser of eligible tax and ₹12,500, provided total income does not exceed ₹5 lakh.

The final income-tax calculation then applies the rebate before the standard 4% health and education cess. For eligible new-regime income slightly above ₹12 lakh, marginal relief requires an additional calculation rather than the ordinary rebate formula.

Why taxable income matters

Gross salary, annual CTC, and taxable total income are not interchangeable. Employer contributions and other compensation components may affect the relationship between CTC and salary. Permitted deductions and taxable income from other sources can also change the rebate result.

If you need to estimate taxable salary first, use the salary breakup calculator or salary TDS monthly deduction calculator before entering figures into the Income Tax Rebate 87A Calculator.

Section 87A Marginal Relief Above ₹12 Lakh

Marginal relief addresses the sharp increase in tax that could otherwise occur immediately after crossing the new-regime rebate threshold. Without relief, a small increase in taxable income above ₹12 lakh could lead to a disproportionately large increase in tax.

For eligible ordinary income, the relief calculation compares slab tax with the amount by which total income exceeds ₹12 lakh. Where applicable, tax after relief is restricted so that it does not exceed that excess amount, before cess.

Example: taxable income of ₹12.10 lakh

At ₹12.10 lakh, new-regime slab tax is ₹61,500. The amount above ₹12 lakh is only ₹10,000. The marginal relief is therefore ₹51,500, leaving ₹10,000 of income tax before the 4% cess. The resulting estimated liability is ₹10,400.

The Income Tax Rebate 87A Calculator separates regular rebate and marginal relief in the result panel. This prevents the full ₹60,000 rebate from being incorrectly carried forward to every income level above ₹12 lakh.

Does marginal relief continue indefinitely?

No. As taxable income increases, the difference between ordinary slab tax and the amount above the threshold becomes smaller. Once normal slab tax no longer exceeds that excess, marginal relief stops applying. There is no unlimited rebate for higher incomes.

Marginal relief is also not a general exemption for special-rate income. If your return contains taxable capital gains or other income subject to special rates, use the relevant statutory provisions and official filing computation instead of assuming this example applies.

Old Versus New Tax Regime: Section 87A Comparison

The most important difference is the income threshold. Under the old regime, the regular Section 87A rebate applies to qualifying total income up to ₹5 lakh, with a maximum rebate of ₹12,500. Under the new regime for FY 2026–27, the corresponding ordinary-income threshold is ₹12 lakh and the maximum regular rebate is ₹60,000.

However, choosing a tax regime involves more than the rebate. The old regime may allow qualifying HRA exemptions and Chapter VI-A deductions that are unavailable under the new regime. The new regime has different progressive slabs and a higher standard deduction for eligible salary income.

Salary standard deduction

For qualifying salary or pension income, this model applies a ₹75,000 standard deduction under the new regime and ₹50,000 under the old regime. It does not apply the salary standard deduction to business income, interest income, or other ordinary income that does not qualify.

The Income Tax Rebate 87A Calculator is designed to answer the rebate question, not to replace a complete regime comparison. If you have substantial deductions or multiple income sources, compare full tax liabilities rather than choosing a regime solely because its rebate threshold is higher.

Common mistakes to avoid

• Using CTC directly as taxable income without checking the salary structure.
• Assuming the ₹12 lakh threshold applies to the old regime.
• Claiming old-regime deductions under the new regime without legal eligibility.
• Applying Section 87A to a nonresident individual.
• Ignoring special-rate income restrictions.
• Calculating cess before subtracting the eligible rebate.
• Assuming the regular rebate remains available in full above the qualifying threshold.

For a broader comparison, explore the tax regime savings comparison calculator. The TDS calculator can also help you understand how estimated annual income tax relates to withholding.