What changed in Budget 2025 for 87A?

Union Budget 2025 raised the new-regime rebate threshold from ₹7,00,000 to ₹12,00,000 and increased the cap from ₹25,000 to ₹60,000. This means a salaried taxpayer in the new regime now pays zero tax up to ₹12.75 lakh of gross income (after the ₹75,000 standard deduction). The Budget also formally introduced a marginal-relief clause for taxpayers whose income marginally exceeds ₹12L — without this provision, even ₹1 over the threshold would trigger thousands of rupees in tax. The old regime was left unchanged at the ₹5,00,000 threshold / ₹12,500 cap.

How does marginal relief work?

Marginal relief prevents a tax cliff at the ₹12L boundary in the new regime. Without it, earning ₹12,10,000 instead of ₹12,00,000 would trigger ~₹61,500 in tax (vs ₹0 at exactly ₹12L) — losing ₹51,500 for ₹10,000 of extra income. The marginal-relief clause caps the tax payable at the income excess over ₹12L. So at ₹12,10,000, the tax cannot exceed ₹10,000 + 4% cess = ₹10,400. The relief naturally tapers off around ₹12,75,000 where the strict tax equals the income excess; beyond that the full slab tax accrues. This applies ONLY in the new regime — the old regime has no marginal relief, so there is a strict cliff at ₹5,00,000.

Is 87A available in both old and new regime?

Yes, Section 87A applies to both regimes — but the thresholds and caps differ sharply. New regime (post-Budget 2025): ₹12,00,000 threshold, ₹60,000 maximum rebate, with marginal relief between ₹12L and ~₹12.75L. Old regime: ₹5,00,000 threshold, ₹12,500 maximum rebate, no marginal relief. The new regime is the default from FY 2023-24; taxpayers must explicitly opt out to use the old regime. Once income crosses the regime-specific threshold, the rebate becomes zero — though the new regime cushions the transition with marginal relief.

Can senior citizens claim 87A rebate?

Yes, Section 87A is available to senior citizens (60-79) and super-senior citizens (80+) under the same threshold rules. However, the basic-exemption slab differs in the OLD regime: ₹3,00,000 for seniors and ₹5,00,000 for super-seniors (vs ₹2,50,000 for regular individuals). This reduces the slab tax payable, often making the rebate sufficient to bring total tax to zero even at the ₹5,00,000 threshold. In the new regime, slab rates are age-agnostic — seniors and super-seniors get the same ₹4,00,000 basic exemption as everyone else, and the same ₹12,00,000 rebate threshold.

Section 87A Rebate Calculator — Tax Rebate & Relief (India)

87A Rebate

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Section 87A Rebate Calculator

Calculate Section 87A tax rebate — full rebate (up to ₹60K) for income up to ₹12L under new regime FY25-26, up to ₹12.5K for ₹5L under old regime. Includes marginal relief calc when income slightly exceeds the threshold.

Reviewed by the CalculatorKosh Editorial TeamUpdated June 2026Free · No sign-up

Your Income Details

Total taxable income (after deductions)

₹

₹0₹10 Cr

Income after subtracting standard deduction + 80C/80D/HRA etc

Tax regime

Age category

Age category affects basic-exemption slab in the old regime only. The new regime uses the same ₹4,00,000 basic exemption for all ages.

Drag sliders to explore different scenarios

Taxable income₹12,00,000

₹0₹25,00,000

What-If Final Tax (New Regime)

₹0

Final Tax Payable

(Full ₹60,000 rebate applied)

Tax before rebate

₹60,000

87A rebate

₹60,000

Marginal relief

—

Tax payable

₹0

ELIGIBLE

Rebate eligibility check

Your ₹12,00,000 income is within the ₹12,00,000 threshold — you get the full rebate of ₹60,000.

New vs Old regime — rebate eligibility

New Regime (current)

₹0

Threshold ₹12,00,000 · cap ₹60,000 · rebate applies

Old Regime

₹1,79,400

Threshold ₹5,00,000 · cap ₹12,500 · rebate N/A

The new regime is currently the lower of the two for this income.

Want the full income tax calculation?

Use the Income Tax Calculator for end-to-end tax computation including deductions (80C / 80D / HRA / NPS / home loan), surcharge for high incomes, slab-by-slab breakdown, and the 4% Health & Education Cess — all with side-by-side new vs old regime comparison.

Tax Composition

Drag sliders to explore different scenarios

Taxable income₹12,00,000

₹0₹25,00,000

What-If Final Tax (New Regime)

₹0

How It Works

This calculator applies Section 87A of the Income Tax Act with the Union Budget 2025 amendments. Section 87A provides a tax rebate — a direct reduction in the tax payable — not a deduction from income. Eligible taxpayers whose total taxable income is at or below the regime-specific threshold get a full rebate that brings tax to zero (capped at a statutory maximum).

What changed in Budget 2025

The new regime threshold was raised from ₹7,00,000 (₹25,000 cap) to ₹12,00,000 (₹60,000 cap) — effectively zero tax up to ₹12.75 lakh of gross income for salaried taxpayers (after the ₹75,000 standard deduction). The Budget also formally codified a marginal-relief clause: if your income marginally exceeds ₹12L, the tax cannot exceed the income excess over the threshold — preventing a tax cliff.

How the old-regime threshold differs

The old regime continues at ₹5,00,000 threshold / ₹12,500 maximum rebate, with no marginal relief — there is a strict tax cliff at ₹5L. Senior citizens (60-79) and super-senior citizens (80+) get higher basic-exemption slabs in the old regime (₹3L and ₹5L respectively), which lowers slab tax but does not change the rebate threshold itself.

Rebate vs deduction — why the distinction matters

A deduction (like 80C, 80D, or HRA) reduces your taxable income before tax is computed. A rebate (like 87A) reduces the tax itself, after the slab calculation. This makes 87A more valuable rupee-for-rupee in the eligible income band — but it disappears entirely once income crosses the threshold (subject to marginal relief in the new regime).

Frequently Asked Questions

Section 87A of the Income Tax Act provides a tax rebate — a direct reduction in the tax payable, not a deduction from income. Eligible resident individuals whose total taxable income is at or below a threshold get a full rebate that brings the tax to zero (capped at a statutory maximum). Under the new regime (FY 2025-26 onwards), the threshold is ₹12,00,000 with a maximum rebate of ₹60,000. Under the old regime, the threshold remains ₹5,00,000 with a maximum rebate of ₹12,500. The rebate is applied to the tax BEFORE the 4% Health & Education Cess; if the rebate brings tax to zero, the cess is also zero.

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