Amendment of section 87a (rebate) of Income-Tax Act,1961 (w.e.f FY 2019-20)
An assessee, being an individual resident in India, whose total income does not exceed Rs. 500,000/-, shall be entitled to a deduction, from the amount of income-tax computed on his Taxable Total Income, ie, after Chapter VIA deduction, an amount of income tax computed or Rs. 12,500/-, whichever is less.
From the AY 26-27 i.e. FY 2025-26, If an individual’s total taxable income is up to Rs.12 lakh and chooses the new tax regime, they will be eligible for rebate/deduction to the extent of 60,000/-.
The rebate is limited to Total Tax payable before the Education Cess (4%).
You can claim tax rebate under this provision if you satisfy the following conditions:
-You must be a Resident Individual; and
-Your total Income, less deductions is equal to or less than Rs 5 Lakhs-in case of Old Regime
-Your total Income, is equal to or less than Rs 12 Lakhs-in case of New Regime.
Under the new tax regime, in addition to above one more rebate cover is also available i.e a type of MARGINAL RELIEF for individuals having total income just above Rs. 12 lakhs as described below:
If the income of an individual exceeds Rs 12,00,000 and tax payable on such income is exceeding the income amount over and above Rs.12,00,000, then the tax will be limited to the extent of such income exceeding Rs. 12 lakhs.
Therefore, for those persons who are earning income above Rs. 12,00,000/- can plan in such a way that they can avail the benefits of Rebate available u/s 87A by making investments which are eligible for deduction as per Chapter VIA of Income tax Act 1961 under old regime. If no Investment, better to opt for New regime and avail the benefit of rebate and marginal relief.