Tax rebate under section 87A (now section 156)
Updated 11 October 2026
The rebate is a reduction in the tax itself for resident individuals with modest incomes. In the new regime it cancels tax of up to ₹60,000 when total income is ₹12 lakh or less, so the tax becomes nil. Known for years as the section 87A rebate, it is section 156 of the Income-tax Act, 2025 from tax year 2026-27, with the same amounts.
How much rebate you get
| Regime | Total income limit | Maximum rebate | Marginal relief above the limit |
|---|---|---|---|
| New regime | ₹12,00,000 | ₹60,000 | Yes |
| Old regime | ₹5,00,000 | ₹12,500 | No |
The rebate equals your slab tax or the maximum, whichever is lower. Slab tax on exactly ₹12 lakh in the new regime is ₹60,000 (₹20,000 + ₹40,000), so the rebate covers it fully. The rebate is applied before cess, so no cess is payable either.
"Total income" means income after deductions, not gross salary. A salaried person in the new regime subtracts the ₹75,000 standard deduction first, which is why salary up to ₹12.75 lakh is tax-free.
Who can claim it
- Resident individuals only. Non-residents, HUFs, firms and companies cannot claim it.
- Any age. Senior and super senior citizens who are resident can claim it in either regime.
- Total income within the limit. Cross ₹12 lakh by even ₹1 and the rebate is gone, though marginal relief (below) protects you in the new regime.
Income the rebate does not cover
The rebate cannot be used against tax on capital gains that are taxed at special rates, such as short-term gains on listed shares and equity mutual funds, and long-term capital gains. Those gains still count when checking whether your total income is within ₹12 lakh. So someone with ₹9 lakh of taxable salary and ₹2 lakh of short-term gains on shares gets the rebate on the slab tax but still pays tax on the gains. See capital gains tax.
Marginal relief just above ₹12 lakh
Without relief, earning ₹12,10,000 instead of ₹12,00,000 would raise your tax (before cess) from nil to ₹61,500: ₹10,000 more income costing ₹61,500 more tax. Marginal relief stops this. In the new regime, if total income is a little over ₹12 lakh, the tax (before cess) cannot be more than the amount by which income exceeds ₹12 lakh.
Normal slab tax = ₹20,000 (₹4 to ₹8 lakh at 5%) + ₹40,000 (₹8 to ₹12 lakh at 10%) + ₹7,500 (15% of ₹50,000) = ₹67,500.
Income above ₹12 lakh = ₹12,50,000 − ₹12,00,000 = ₹50,000.
With marginal relief, tax before cess is the lower of ₹67,500 and ₹50,000 = ₹50,000. Relief = ₹17,500.
Cess at 4% = ₹2,000. Tax payable = ₹52,000, instead of ₹70,200 without relief.
For a salaried person, this is a gross salary of ₹13,25,000 (₹12,50,000 + ₹75,000 standard deduction).
| Taxable income | Normal slab tax | Cap (income above ₹12 lakh) | Tax with 4% cess |
|---|---|---|---|
| ₹12,00,000 | ₹60,000 | Rebate applies | Nil |
| ₹12,10,000 | ₹61,500 | ₹10,000 | ₹10,400 |
| ₹12,25,000 | ₹63,750 | ₹25,000 | ₹26,000 |
| ₹12,50,000 | ₹67,500 | ₹50,000 | ₹52,000 |
| ₹12,70,000 | ₹70,500 | ₹70,000 | ₹72,800 |
| ₹12,75,000 | ₹71,250 | ₹75,000 (no relief) | ₹74,100 |
Relief runs out where normal slab tax equals the excess over ₹12 lakh: ₹60,000 + 15% of the excess = the excess, which happens when the excess is about ₹70,588. So marginal relief applies up to a taxable income of about ₹12,70,588, or a salary of about ₹13,45,588. Above that you simply pay normal slab tax.
The old regime rebate
In the old regime the rebate is up to ₹12,500 when total income is up to ₹5 lakh, which exactly covers the 5% slab tax on ₹2.5 lakh to ₹5 lakh. There is no marginal relief. At ₹5,10,000 of taxable income the tax is ₹12,500 + 20% of ₹10,000 (₹2,000) = ₹14,500, plus cess of ₹580 = ₹15,080, all because of ₹10,000 of extra income. If you are near ₹5 lakh in the old regime, an extra deduction such as section 80C or 80D can bring you back under the limit.
How to claim it
You do not apply separately. Your employer allows the rebate while working out TDS if your estimated income qualifies, and the return form calculates it automatically. If TDS was deducted even though your income was within the limit, for example because of interest income that the bank taxed, file your return to get it refunded. Check your figure with the income tax calculator, and read about the 2025 Act's new numbering in Income-tax Act, 2025.