Rebate Section 87A
Definition
A tax rebate making net taxable income up to ₹12 Lakhs tax-free under the New Regime and ₹5 Lakhs under the Old Regime.
Key Takeaways
- Section 87A makes income tax nil for incomes up to ₹12 Lakhs (New) or ₹5 Lakhs (Old).
- Rebate amount: up to ₹60,000 (New Regime) or ₹12,500 (Old Regime).
- Available only to resident individuals, not HUFs, NRIs, or companies.
- Applied after calculating tax but before surcharge and cess.
Detailed Explanation
Section 87A is a tax rebate provision that makes income tax liability zero for resident individuals earning below specified income limits. Under the New Tax Regime, a rebate of up to ₹60,000 is available for net taxable income up to ₹12,00,000, making the entire tax liability nil. Under the Old Tax Regime, a rebate of up to ₹12,500 is available for net taxable income up to ₹5,00,000.
This rebate is calculated after computing the tax liability but before applying surcharge or cess. It is exclusively available to resident individuals; HUFs, NRIs, companies, and super senior citizens cannot claim it. Additionally, certain capital gains and incomes taxed at special rates are ineligible for this rebate. Section 87A is one of the most beneficial provisions for middle-income taxpayers in India.