🧾 What is Section 87A Rebate?
Section 87A provides a rebate (reduction) in income tax liability to resident individuals whose total taxable income does not exceed the specified threshold.
Rebate = ₹12,500 or actual tax liability (whichever is lower)
This essentially means “zero tax” for many low-income earners.
📅 Latest Rebate Limits (As per FY 2024–25)
| Tax Regime | Income Limit for Rebate | Rebate Amount |
|---|---|---|
| Old Regime | Up to ₹5,00,000 | ₹12,500 |
| New Regime (Section 115BAC) | Up to ₹7,00,000 | ₹25,000 |
Note: New regime offers a higher rebate limit under Section 87A to promote simplified taxation.
✅ Eligibility Criteria
To claim the rebate under Section 87A, all the following conditions must be fulfilled:
- Must be a resident individual (India)
- Total taxable income must not exceed the prescribed limit
- Applicable only to individual taxpayers, not HUFs, companies, or firms
- Rebate is before adding cess (4%) to the final tax
📊 How It Works: Real Examples
🎯 Case 1: Income under ₹5,00,000 (Old Regime)
Taxable income: ₹4,90,000
Tax before rebate: ₹12,000
Rebate under 87A: ₹12,000
Tax after rebate: ₹0
🎯 Case 2: Income under ₹7,00,000 (New Regime)
Taxable income: ₹6,80,000
Tax before rebate: ₹24,400
Rebate under 87A: ₹24,400
Tax after rebate: ₹0
⚠️ Case 3: Income above ₹7,00,000 (New Regime)
Taxable income: ₹7,10,000
Rebate: Not Available
Tax payable: As per normal slab + cess
Solution: Invest ₹10,000 under NPS (Section 80CCD) or PPF (80C) to reduce taxable income back under ₹7,00,000 and claim rebate.
💡 Tax Planning Tips to Stay Within 87A Limits
1. Choose the Right Regime Wisely
If you have limited deductions, the new regime with higher rebate (₹7 lakh) may be better.
2. Use Section 80C Investments
In the old regime, invest in PPF, ELSS, LIC, etc. to reduce income to ₹5 lakh threshold.
3. Utilize NPS & 80CCD(1B)
Additional ₹50,000 deduction under NPS (above 80C) can help you cross the rebate threshold smartly.
4. Claim HRA, Home Loan Interest (Section 24)
Use housing rent or home loan interest to push your taxable income below the limit.
5. File ITR on Time
Even if no tax is payable, filing ITR is mandatory to claim refund or carry forward losses.
📉 Common Mistakes to Avoid
🚫 Ignoring regime benefits — not comparing both regimes before filing
🚫 Not reducing income with available deductions to qualify for rebate
🚫 Misreporting total income or TDS, which may push you above the limit
🚫 Missing deadlines — belated return means you can’t revise and plan later
📌 Summary Table
| Particulars | Old Regime | New Regime (115BAC) |
|---|---|---|
| Max Income Limit | ₹5,00,000 | ₹7,00,000 |
| Max Rebate | ₹12,500 | ₹25,000 |
| Deductions Needed? | Yes (80C, 80D, etc.) | No (Zero deduction required) |
| Ideal for | Deduction-heavy taxpayers | Simplified filers & salaried |
📣 Final Thoughts
Section 87A is a powerful tax-saving provision that allows you to legally reduce your tax burden to zero, but it requires smart planning. With the latest income thresholds under both regimes, now is the best time to review your salary structure, deductions, and filing approach.
Whether you're a salaried employee, freelancer, or consultant, make sure you optimize your returns through Section 87A.
🔍 Need Help Choosing Between Old vs New Regime?
Our team at Verotus Finlegal Solutions LLP can help you:
✅ Calculate your tax under both regimes
✅ Plan investments and deductions for maximum rebate
✅ File ITR with regime-based optimization
✅ Handle notices and refunds
📍 Kolhapur, Maharashtra
🌐 www.verotusllp.com
📞 +91-7066336680
