Section 87A Rebate for AY 2026-27 ( FY 2025-26 ) under New Tax Regime and Old Tax Regime as per Union Budget 2025-26. Amendment proposed, amount of rebate and eligibility.
Section 87A Rebate for AY 2026-27 ( FY 2025-26 ). Union Finance Minister shall present Union Budget 2025-26 in Parliament on 1st February 2025. Hopes are high that taxpayers shall be given much desired relief in the form of higher rebate. The post shall be updated on 1st February 2025 for the proposed changes in section 87A rebate for Financial Year 2025-26 (Assessment Year 2026-27).
As per Budget speech of the Finance Minister, no income tax shall be payable up to income of Rs. 12 lakhs (after considering the rebate under section 87A).
The rebate proposed for AY 2025-26 as compared to AY 2025-26 is as under:
| AY 2026-27 | AY 2025-26 | |
| Section 87A Rebate under Old Tax Regime | Up to 12500/- i.e. 100 Percent tax rebate under section 87A up to total income of Rs. 5 lakhs | Up to 12500/- i.e. 100 Percent tax rebate under section 87A up to total income of Rs. 5 lakhs |
| Section 87A Rebate under New Tax Regime | Up to Rs. 60000/- i.e. 100% of tax where total income does not exceed Rs. 12 Lakhs | Up to Rs. 25000/- i.e. 100% of tax where total income does not exceed Rs. 7 Lakh |
The Finance Ministry has issued the following Table to illustrate total tax benefit of slab rate changes and rebate at different income levels can be illustrated in the table below:
| AY 2025-26 | AY 2024-25 | |
| Section 87A Rebate under Old Tax Regime | Up to 12500/- i.e. 100 Percent tax rebate under section 87A up to total income of Rs. 5 lakhs | Up to 12500/- i.e. 100 Percent tax rebate under section 87A up to total income of Rs. 5 lakhs |
| Section 87A Rebate under New Tax Regime | Up to Rs. 25000/- i.e. 100% of tax where total income does not exceed Rs. 7 Lakhs | Up to Rs. 25000/- i.e. 100% where total income does not exceed Rs. 7 Lakhs |
Income Tax Rebate under section 87A of Income Tax Act 1961 provides a rebate from income tax up to Rs. 12500/- to an individual resident assessee whose total income (taxable income) does not exceed Rs. five lakhs.
Thus, for those not opting for New Simplified Personal Income Tax Regime, taking into account deduction available under section 80C, income up to Rs. 7.00 lakhs (Rs. 12 lakhs for AY 2026-27) will be out of tax net.
Marginal relief under section 115BAC:
Marginal Relief ensures that the tax payable by a person having income marginally above Rs 12 lacs is required to pay only marginal amount of tax equal to the amount of income above Rs 12 lacs so that his carry home is also Rs 12 lacs. In this case he will be required to pay a tax of Rs 10,000/-
For example, for a person having income of Rs. 12,10,000/-, in the absence of marginal relief, the tax, works out to be Rs. 61,500/-(5% of Rs.4 lacs+10% of 4 lac and 15% of Rs.10 thousand). However, due to marginal relief, the amount of tax to be actually paid is Rs. 10,000/- (the amount by which the income exceeds Rs. 12 Lakhs).
The following table gives an example of Marginal relief for various income brackets:
| Taxable Income | Tax without Marginal relief (Rs.) | Marginal Relief (Rs.) | Tax actually payable with marginal relief (Rs.) |
| (a) | (b) | (c) | (d) [(b)+(1200000-(a)] |
| 12,10,000/- | 61,500/- | 51,500/- | 10,000/- |
| 12,50,000 | 67,500/- | 17,500/- | 50,000/- |
| 12,70,000/- | 70,500/- | 500/- | 70,000/- |
| 12,75,000/- | 71,250/- | Nil | 71,250/- |
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