Income-tax returns: How much rebate can you claim under Section 87A? Eligibility and rules explained

Income-tax returns: The income-tax department has notified all ITR forms 1-5 for assessment year 2026-27 i.e. financial year 2025-26 and enabled the excel utility facility for the online ITR-1 (Sahaj), ITR-2, ITR-3, and ITR-4 (Sugam) forms for this tax year (AY27 / FY26).

Notably, availability of excel utility means that taxpayers can first prepare their returns offline before uploading them digitally. Deadline for filing taxes is 31 July, which you can do by logging into the e-filing portal with your User ID and password.

Today we explain what rebate under Section 87A is, differences as per the new and old tax regimes, how much rebate individual taxpayers can claim, eligibility criteria, the rules and other details.

What is rebate under Section 87A?

Unlike tax exemptions and tax deductions, income tax rebate is supposed to be claimed from the total tax payable under Section 87A. The facility reduces tax for low to middle-income earners, with different income limits applicable under the old tax regime and the new tax regime.

It is separate from other exemptions and deductions offered under the old and new tax regimes. A key point of differentiation is that deductions are offered under various sections under the Income-Tax Act while rebate is available only under Section 87A'; and exemptions are provided on sources of income as defined in the laws.

Currently, Section 87A allows individuals to claim a rebate of up to ₹12,500 under the old tax regime and up to ₹60,000 under the new tax regime.

Limit & rules: How much rebate can taxpayers claim?

Rebate reduces tax dues by deducting a fixed amount from the calculated payable tax for middle to low-income earners (includes individuals within the 10% tax slab bracket). Thus, under the old regime, a rebate of ₹12,500 is allowed for an income up to ₹5 lakh, while the new tax regime allows rebate of ₹60,000 for income up to ₹12 lakh.

According to Clear Tax, rebate can be applied to the total tax before adding a health and education cess of 4%.

Further, rebate is only allowed for individuals. Companies and Hindu Undivided Families (HUFs) cannot claim this facility. And Non-resident Indians (NRI) are also not eligible for a rebate under 87A.

Notably, rebate cannot be claimed against long-term capital gains (LTCG) under Section 112A of the I-T Act, which deals with profits from shares; and short-term capital gains (STCG) under Section 111A of the ITA, which also deals with profits from shares.

You are also not allowed to claim rebate on income taxed at special rates such as winnings from lottery and game shows.

How to claim rebate in ITR filing?

• Compute your gross total income for the financial year.

• Once you have the total, exclude exemptions and deductions as applicable for investment and tax savings, etc.
• Declare your total taxable income in ITR after factoring in deductions.
• Claim rebate under section 87A for income within prescribed limits (mentioned above).
• The Income-Tax Department reportedly allows taxpayers to claim rebate in the updated ITR forms — ITR-2 and ITR-3.

ITR: Marginal relief explained

Under the new tax regime, for individuals whose income exceeds the ₹12 lakh limit with a slight gap, and where the tax exceeds the income over the cap, the tax is limited to income exceeding ₹12 lakh, the Clear Tax report added. This is called the marginal relief facility.

For example: For income of ₹12.15 lakh the income over limit is ₹15,000. For the full income, the tax would work out to ₹62,250. But with marginal relief factored in (tax more than income over limit i.e. 62,250 > 15,000), the difference is calculated as rebate (62,250 - 15,000 = 47,240).

Thus, you tax liability would be calculated tax - rebate (62,250 - 47,240) = payable tax (15,000) + health and education cess at 4% = ₹15,600. This has effectively brought down your tax liability from ₹62,250 to ₹15,600.