The rebate under section 87A ensures that lower-income earners receive some relief by reducing or nullifying their tax liability.

To qualify for the rebate under Section 87A, the following criteria must be met:

1. Residential Status: The individual must be a resident of India. Non-resident individuals are not eligible for this rebate.
2. Total Income: The Net Total Income should not exceed ₹5,00,000 under the old tax regime. The Net Total Income should not   exceed ₹7,00,000 under the new tax regime (Section 115BAC
3. Taxable Income: The rebate is available on the amount of income tax payable on the total income before adding health and education Cess.

Rebate Amount

• Under Old Tax Regime:
  • If the total income does not exceed ₹5,00,000, the rebate is the amount of income tax payable or ₹12,500, whichever is less.

• Under New Tax Regime (Section 115BAC):
  • If the total income does not exceed ₹7,00,000, the rebate is the amount of income tax payable or ₹25,000, whichever is less.
  • If the total income exceeds ₹7,00,000, the rebate is calculated as follows:
    • Step 1: Total income minus ₹7,00,000 (A)
    • Step 2: Compute income-tax payable on total income (B)
    • Step 3: If B > A, the rebate under Section 87A would be B - A​​​​.

Key Points

• Health and Education Cess: The rebate is applied before adding the 4% health and education Cess.
• Non-residents are not eligible to claim rebate: Only resident individuals are eligible.
• Income Limits: Ensure your total income is within the specified limits mentioned above to avail the rebate.