Income tax
Section 87A Rebate and Marginal Relief
Understand why eligible resident individuals can have little or no tax near the rebate threshold—and why special-rate income needs separate attention.
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Rebate versus deduction
A deduction reduces the income on which tax is calculated. A rebate is applied after slab tax has been calculated. Calling Section 87A a deduction can lead to the wrong taxable-income figure and the wrong comparison between regimes.
New-regime position for AY 2026–27
For an eligible resident individual under the new regime, the rebate can be up to ₹60,000 when total income does not exceed ₹12 lakh. A salaried person may have gross salary above ₹12 lakh and still reach eligible total income after the applicable standard deduction, subject to the official conditions.
Old-regime position
Under the old regime, the rebate can be up to ₹12,500 when total income does not exceed ₹5 lakh for an eligible resident individual. The old and new thresholds should never be mixed in one calculation.
Why marginal relief exists
Without relief, crossing the ₹12 lakh new-regime threshold by a small amount could cause tax to jump by more than the extra income. Marginal relief limits this cliff in eligible cases. It is not a general deduction and it does not mean every rupee above ₹12 lakh is tax-free.
Important exclusions
Special-rate income, including certain capital gains, can change how the rebate operates. Non-residents are not eligible for this resident-individual rebate. Verify the exact treatment for your income mix instead of relying on a salary-only estimate.
Sources and verification
Use these references to verify this income tax guide. Check the document date, relevant period and any conditions before relying on a figure or rule.
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