How to calculate Rebate under Section 87A for Individual Taxpayers ?
To give individual taxpayers tax relief, section 87A allows a rebate on the tax payable by a resident individual in India.
1) How to calculate Rebate under section 87A under New Tax Regime ?
A) how to Calculate Rebate if Income does not exceed ₹ 7 lac ?
The rebate under section 87A will be lower of :.
- The income-tax payable on their total income, or
- ₹25,000.
However, the rebate cannot exceed the total tax payable before applying the rebate for that assessment year.
Example : Mr. Sachin 50 year of age, a resident Indian, earns ₹6.5L in FY 2024-25. Learn how Section 87A reduces the Tax Liability.
Computation of Tax Liability of Mr Sachin For FY 2024-25
| Particulars | Amount |
| Tax on Total Income of ₹6.5 lac (₹ 6.5 lac – ₹ 3 lac) * 5% | ₹ 17,500 |
| Less : Rebate ( Lower of 25000 or Tax Payable ) | ₹ 17,500 |
| Tax Liability | Nil |
B) How to calculate of Rebate if Income Exceed ₹ 7 lac ?
If a resident individual’s total income exceeds ₹7 lakhs should follow following steps :
- Step 1: Deduct ₹7 lakh from total income → (A)
- Step 2: Calculate tax on total income → (B)
- Step 3: If B > A, rebate = B – A (limited to tax payable).
The amount of rebate under section 87A shall not exceed the amount of income-tax (as computed before allowing such rebate) on the total income of the assessee.
Example : Mr Sharma ( Aged 45 ) having a total income of ₹ 7.15 lac. Compute tax liability and rebate for FY 2024-25.
| S N | PARTICULARS | AMOUNT |
| 1 | Step 1: Total Income of ₹ 7,15,000 – ₹ 7,00,000 (A) | ₹ 15,000 |
| 2 | Step 2: Tax on total income of ₹ 7,15,000 (Before Education Cess ) (B) | ₹ 21,500 |
| 3 | Step 3: Since B > A, rebate u/s 87A would be B-A [₹ 21,500 – ₹ 15,000] | ₹ 6,500 |
| ₹ 15,000 | ||
| Add: Education Cess | ₹ 600 | |
| Tax Liability | ₹ 15,600 |
2) How to calculate Rebate under section 87A under Old Tax Regime ?
- If total income ≤ ₹5,00,000, rebate = lower of:
- Total income-tax payable or
- ₹12,500.
The amount of rebate under section 87A shall not exceed the amount of income-tax (as computed before allowing such rebate) on the total income of the assessee with which he is chargeable for any assessment year.
Example : Mr Pant (Aged 47) resident of india, has a total income of ₹ 4,15,000, Calculate Tax liability and rebate for FY 2024-25.
| S NO. | PARTICULARS | AMOUNT |
| 1 | Tax on total income of ₹ 4,15,000, (₹ 4,15,000 – ₹ 3,00,000) * 5% | ₹ 8,250 |
| 2 | Less: Rebate u/s 87A (Lower of tax payable or ₹ 12,500) | ₹ 8,250 |
| 3 | Tax Liability | NIL |
Note :
• Rebate under section 87A is allowed from income-tax computed before adding Health and education cess on income-tax.
• Rebate under section 87A is, however, not available in respect of tax payable @10% on long term capital gains taxable u/s 112A.