Home › Tax Saving › Section 87A
Zero tax up to ₹7L (new regime) or ₹5L (old regime)
A direct rebate (not deduction) that wipes out tax for taxpayers with income up to ₹7,00,000 (new regime) or ₹5,00,000 (old regime). Effectively a zero-tax band for low-income filers.
Maximum deduction
₹25,000 (new regime, income ≤ ₹7L) or ₹12,500 (old regime, income ≤ ₹5L)
Who can claim
Resident individual taxpayers (not HUF, not non-residents, not senior super-citizens above 80 — they have separate slabs anyway). Total income (after Chapter VI-A deductions) must be at or below the threshold.
How it works
Section 87A provides a tax rebate to resident individuals whose total income (after all deductions) does not exceed the threshold. Old regime: ₹5L threshold, max rebate ₹12,500. New regime (FY 2023-24 onwards): ₹7L threshold, max rebate ₹25,000. Above the threshold there is a marginal-relief band — effectively, a person earning slightly above ₹7L doesn't suddenly pay full tax; tax is restricted so that take-home isn't worse than someone earning exactly ₹7L. From FY 2025-26, new regime threshold is enhanced to ₹12L (max rebate ₹60,000) — verify the latest Budget.
Eligible instruments
Salaried employees with low income
Pensioners
Small business owners filing under presumptive (44AD/44ADA)
Documents you'll need
No additional documentation — automatic if your taxable income is within the threshold
Standard Form 16 / ITR submission applies
Worked example
New regime taxpayer. Gross salary: ₹7,50,000. Standard deduction: ₹50,000. Taxable income: ₹7,00,000.
Tax under new regime slabs on ₹7L: ₹25,000 (approx). 87A rebate: ₹25,000. Net tax: ₹0. Cess: ₹0.
Effective tax = 0. Without 87A you'd have paid ~₹26,000 tax + cess.
Common mistakes to avoid
Forgetting that 87A is on TAXABLE income (after deductions), not gross — can stack 80C/80D first to slip under the threshold
Including LTCG above ₹1L in income calculation incorrectly — special-rate income can disqualify 87A
Assuming 87A applies to senior super citizens (80+) — they have separate slabs and 87A is moot
FAQ
My income is ₹7,20,000 — do I get any 87A?
You exceed the ₹7L cap, so direct 87A doesn't apply, but marginal relief kicks in: tax cannot exceed (₹7,20,000 − ₹7,00,000) = ₹20,000. Without marginal relief you'd pay ~₹27,000.
Is 87A available to NRIs?
No. Only resident individuals qualify for Section 87A.
Old vs new regime — which gives better 87A?
New regime is far more generous: ₹7L threshold vs ₹5L in old regime, and ₹25,000 max rebate vs ₹12,500. Most low-income earners are better off in new regime.
Will the ₹12L threshold from Budget 2025 apply to all years?
It applies from FY 2025-26 (AY 2026-27) onwards under new regime — verify the most recent Finance Act before filing.
Related sections
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