Section 87A – Rebate for Low-Income Taxpayers: Pay Zero Tax If You Qualify

There’s good news for small taxpayers. If your total income is within a certain limit, you may be eligible for a rebate under Section 87A—which can bring your net tax payable to zero.

This rebate is not a deduction but a direct reduction in your tax liability. Whether you’re a salaried employee, freelancer, pensioner, or self-employed, this provision can offer significant relief if you qualify.

Let’s understand who is eligible, how much rebate is allowed, and how to claim it while filing your ITR.

✅ What Is Section 87A of the Income Tax Act?

Section 87A offers a tax rebate to resident individuals whose total income does not exceed the prescribed threshold.

This means:

• You calculate your total taxable income after deductions (like 80C, 80D, etc.)
• If the final income falls below the threshold, you can claim a rebate on tax payable (not on income)

The rebate is available for both old and new tax regimes, with different income limits and rebate amounts.

📋 Rebate Limits Under Section 87A (AY 2024–25 / FY 2023–24)

So, if you opt for the new regime and your taxable income is up to ₹7 lakh, you don’t have to pay any tax!

💡 Example of Rebate Calculation

Let’s say:

• Your taxable income = ₹4,90,000 (after deductions under old regime)
• Your calculated tax liability (before cess) = ₹12,000
• Since income is below ₹5,00,000, you get a rebate of ₹12,000

Net tax = ₹0

Similarly:

• If your income is ₹6,90,000 under the new regime, tax = ₹25,000 → rebated fully → Net tax = ₹0

⚠️ Key Conditions to Claim Section 87A Rebate

1. You must be an individual (not a HUF or firm)
2. You must be a resident of India
3. Your total income after deductions must be:
   • ₹5 lakh or less (old regime), or
   • ₹7 lakh or less (new regime)
4. A rebate is available before adding the health and education cess
5. The rebate is not available for NRIS or senior citizens who are non-residents

📦 Where to Claim Rebate in ITR

While filing your income tax return:

• Calculate your total tax liability
• Go to the Tax Computation Sheet or “Rebate under Section 87A” field
• The rebate will automatically be adjusted based on your income and tax

Double-check the regime selected and whether deductions have been applied correctly.

🧠 People Also Ask

❓ Can I claim both deductions under 80C and rebate under 87A?

Yes. First, apply all deductions (80C, 80D, HRA, etc.) to reduce your total income. Then, if your net taxable income is within ₹5 lakh or ₹7 lakh (based on regime), the rebate is applied on tax payable.

❓ Is Section 87A rebate refundable?

No. The rebate is not a refund. It is adjusted against tax liability. If your tax is already zero or negative (after TDS or advance tax), the rebate doesn’t result in any cash refund.

❓ Can senior citizens claim 87A?

Yes—only if they are resident individuals and their taxable income is within the prescribed limit.

❓ What if income is ₹5,01,000 or ₹7,01,000?

Even exceeding the limit by ₹1 makes you ineligible for the rebate. You’ll have to pay tax on the entire amount as per the slab.

❗ Planning Tip: Use Deductions to Stay Within Rebate Limit

If your income is slightly over the limit, consider:

• Investing in ELSS, PPF, or LIC under 80C
• Paying health insurance premiums under 80D
• Submitting rent receipts for HRA exemption

These deductions can reduce your taxable income and make you eligible for a full rebate under 87A.

🎯 Final Thoughts from a CA’s Desk

“Section 87A is your first line of defence against tax if you’re a low-income earner. Plan smartly and claim it the right way.”

With the new regime offering a rebate up to ₹7 lakh on income, more individuals now qualify to pay zero tax, without even claiming deductions. But make sure your ITR is filed correctly to reflect the rebate, especially if TDS has been deducted.

📞 Want to Pay Zero Tax Legally with Section 87A? We Can Help.

At Callmyca, we help:

• Choose the right tax regime for your income
• Apply deductions and rebates properly
• File accurate and optimised ITRS
• Get refunds for the excess TDS already deducted

👉 Click here to book your tax filing or rebate consultation via Callmyca