23/05/2026
What is Section 87A?
Section 87A is a rebate provision under the Indian Income Tax Act that reduces your final income tax liability.
It is available only for:
Resident Individuals
Taxable income within prescribed limit
Not available to companies/firms
Under the New Tax Regime (FY 2025-26 / AY 2026-27):
If taxable income ≤ ₹12,00,000
Rebate available up to ₹60,000
Result: Tax becomes NIL in many cases �
Etds +1
For salaried persons:
Standard deduction = ₹75,000
Therefore salary income up to around ₹12.75 lakh may effectively become tax-free in many situations. �
Why was Section 87A introduced?
Government introduced it to:
Give relief to middle-class taxpayers
Increase disposable income
Reduce tax burden on lower & moderate earners
Encourage spending and savings
Simple meaning:
“If your income is within the limit, government gives rebate and reduces your tax.”
New Tax Regime – 87A Limit
Regime
Income Limit
Maximum Rebate
Old Regime
₹5,00,000
₹12,500
New Regime
₹12,00,000
₹60,000
�
Etds +1
What is Marginal Relief?
Marginal Relief means:
If your income exceeds ₹12 lakh by a small amount, then your extra tax should NOT become higher than your extra income.
Government gives relief so taxpayers are not unfairly punished for earning slightly more income.
Why Marginal Relief is Important?
Without marginal relief:
Income
Tax
₹12,00,000
₹0
₹12,01,000
Around ₹60,150
Imagine earning only ₹1,000 extra but paying ₹60,000+ tax.
That would be unfair.
So marginal relief limits the tax.
How Marginal Relief Works
Rule:
Tax payable cannot exceed the amount by which income exceeds ₹12 lakh.
Example 1 – Income ₹12,10,000
Extra income over limit: ₹12,10,000 − ₹12,00,000 = ₹10,000
Normal tax calculation: ≈ ₹61,500
But under marginal relief: Maximum tax allowed = ₹10,000
So:
Tax becomes ₹10,000
Plus 4% cess = ₹10,400 approx. �
Oquilia +1
Example 2 – Income ₹12,50,000
Extra income: ₹50,000
Normal tax: ≈ ₹67,500
Marginal relief applies: Tax restricted to ₹50,000
After cess: ≈ ₹52,000 �
Oquilia
Example 3 – Income ₹13,00,000
At higher income levels, normal slab tax becomes lower than relief limit.
Then marginal relief stops automatically.
You pay normal tax as per slab.
Important Points
✅ Applicable only to resident individuals
✅ Mainly under New Tax Regime u/s 115BAC
✅ Rebate not available on certain special-rate incomes like some capital gains from AY 2026-27 onwards �
✅ Rebate reduces TAX, not income
✅ Marginal relief helps only near threshold limit
Tax Garden +2
Simple Formula
If Income ≤ ₹12 lakh
Tax = NIL (after rebate)
If Income slightly above ₹12 lakh
Tax payable ≤ Extra income above ₹12 lakh
Easy Understanding in One Line
Section 87A
“Government removes your tax.”
Marginal Relief
“Government prevents sudden huge tax when income crosses limit slightly.”
