Section 87A Rebate AY 2026-27 is one of the most important tax benefits available to individual taxpayers. The rebate helps reduce tax liability for low and middle-income earners and can even bring the total tax payable to zero if the taxpayer satisfies the prescribed conditions. As taxpayers begin filing their Income Tax Returns for AY 2026-27, understanding the Section 87A rebate becomes essential. The rebate differs under the old tax regime and the new tax regime, making it important for taxpayers to evaluate both options before filing their returns.
What is Section 87A Rebate AY 2026-27?
The Section 87A Rebate AY 2026-27 is a tax rebate available to resident individual taxpayers. Unlike deductions under various sections of the Income Tax Act, this rebate directly reduces the tax payable after calculating total income tax liability.
The rebate is claimed after computing the total tax amount and before adding the Health and Education Cess of 4 percent. The primary objective of Section 87A is to provide tax relief to low and middle-income taxpayers and reduce their overall tax burden.
Section 87A Rebate Under the Old Tax Regime
Under the old tax regime, resident individuals with taxable income up to ₹5 lakh can claim a rebate under Section 87A.
The maximum rebate available under the old regime is ₹12,500. If the total tax liability is lower than ₹12,500, the taxpayer can claim the entire tax amount as a rebate. As a result, taxpayers with taxable income up to ₹5 lakh under the old regime may effectively pay zero income tax after claiming the rebate.
Section 87A Rebate Under the New Tax Regime
The Section 87A Rebate AY 2026-27 provides significantly higher relief under the new tax regime. Resident individuals with taxable income up to ₹12 lakh can claim a rebate of up to ₹60,000. This provision makes the new tax regime highly beneficial for salaried individuals and middle-income taxpayers. Taxpayers choosing the new regime can substantially reduce their tax liability and, in many cases, eliminate their tax burden entirely.
Who Can Claim Section 87A Rebate?
The rebate is available only to resident individual taxpayers. The following taxpayers are eligible:
- Resident individuals.
- Salaried employees.
- Pensioners.
- Individual professionals.
- Individual business taxpayers.
The following taxpayers cannot claim the rebate:
- Companies.
- Partnership firms.
- Hindu Undivided Families (HUFs).
- Non-Resident Indians (NRIs).
- Trusts and other entities.
Therefore, residency status and taxpayer category play an important role while claiming the Section 87A rebate.
Income Not Eligible for Section 87A Rebate
Although the Section 87A Rebate AY 2026-27 offers significant relief, certain incomes taxed at special rates do not qualify. The rebate cannot be claimed against:
- Long-term capital gains under Section 112A.
- Short-term capital gains under Section 111A.
- Lottery winnings.
- Income from horse racing.
- Other income taxed at special rates.
Taxpayers earning capital gains should carefully calculate their tax liability before claiming the rebate.
Marginal Relief Under Section 87A Rebate AY 2026-27
Marginal relief is another important feature available under the new tax regime.
Suppose a taxpayer’s income slightly exceeds ₹12 lakh. In such situations, the additional tax payable should not exceed the amount by which income exceeds ₹12 lakh. For example, if a taxpayer earns ₹12.15 lakh, the income exceeding the threshold is ₹15,000. Without marginal relief, the tax liability may become substantially higher. Marginal relief ensures that the additional tax payable remains limited, thereby preventing an excessive tax burden on taxpayers whose income slightly crosses the prescribed threshold.
How to Claim Section 87A Rebate AY 2026-27 While Filing ITR
Taxpayers should calculate their gross total income and claim all eligible deductions and exemptions applicable under their selected tax regime. After calculating the total taxable income, the rebate can be claimed directly while filing the Income Tax Return. The latest ITR utilities allow taxpayers to claim the rebate automatically if they satisfy the eligibility conditions. Taxpayers should verify their Form 16, AIS, Form 26AS, TIS, and other income documents before filing their return.
The Section 87A Rebate AY 2026-27 remains one of the most valuable tax-saving provisions available to resident individual taxpayers. The old tax regime provides a rebate of up to ₹12,500 for income up to ₹5 lakh, while the new tax regime offers a rebate of up to ₹60,000 for income up to ₹12 lakh.
Understanding the eligibility rules, income limits, and marginal relief provisions can help taxpayers reduce their tax liability and file their Income Tax Returns accurately.
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