As the income tax filing season approaches, understanding tax rebates can help you significantly reduce your tax liability. One of the most important provisions for individual taxpayers is Section 87A, which offers substantial relief—especially under the new tax regime.

If your income falls within a certain limit, you may end up paying zero tax. Here’s a simple and complete breakdown to help you file your ITR smartly.

What is Tax Rebate Under Section 87A?

A tax rebate is a direct reduction in the total tax payable. Unlike deductions, which reduce your taxable income, a rebate lowers your final tax bill.

Under Section 87A, the government provides relief mainly to low and middle-income taxpayers.

How Much Rebate Can You Get?

The benefit differs between the old and new tax regimes:

Old Tax Regime:

• Income up to ₹5 lakh
• Maximum rebate: ₹12,500
• Result: Zero tax liability

New Tax Regime (2026):

• Income up to ₹12 lakh
• Maximum rebate: ₹60,000
• Result: Tax can be reduced to zero

This makes the new tax regime highly beneficial for salaried individuals within this income range.

How is the Rebate Applied?

A key point many taxpayers miss is that the rebate is applied before adding 4% health and education cess.

This means your total tax is reduced first, and only then cess is calculated—further lowering your final tax outgo.

Step-by-Step: How to Claim Rebate in ITR

Filing correctly is crucial to avail the benefit:

1. Calculate Gross Total Income
   Add all your income sources for the financial year
2. Apply Deductions (if using old regime)
   Subtract eligible deductions like 80C, 80D, etc.
3. Determine Taxable Income
   The remaining amount becomes your taxable income
4. Claim Rebate
   If your income is within the eligible limit, apply rebate under Section 87A

Modern ITR forms like ITR-2 and ITR-3 include built-in options to claim this benefit easily.

What is Marginal Relief?

Marginal relief is a major advantage under the new tax regime.

If your income slightly exceeds ₹12 lakh, and the tax payable becomes disproportionately high, marginal relief ensures that:

• Your tax does not exceed the extra income earned above ₹12 lakh

This prevents sudden spikes in tax liability.

When is Rebate NOT Available?

You cannot claim rebate under certain conditions:

• Income from stock market gains (LTCG under Section 112A, STCG under Section 111A)
• Winnings from lotteries or game shows
• If you are a company, HUF, or non-resident (NRI)

Rebate vs Deduction vs Exemption

Many taxpayers confuse these terms. Here’s a simple distinction:

• Exemption: Income not taxed at all
• Deduction: Reduces taxable income (e.g., LIC, PPF)
• Rebate: Reduces final tax payable

Final Takeaway

Understanding Section 87A can help you legally reduce your tax to zero if your income falls within the eligible limit.

With the ₹12 lakh threshold under the new tax regime, taxpayers now have a bigger opportunity to save money. Just ensure accurate calculations and proper filing to make the most of this benefit.

A little planning before filing your ITR can lead to significant tax savings—so don’t miss out.