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New Act — Section 156 (Old 87A)

Section 156 of Income Tax Act 2025 (Old 87A): ₹12L Rebate Explained

Old Sec 87A = New Sec 156. New-regime rebate up to ₹60,000 wipes tax to ₹12L total income (₹12.75L salary with std ded) — plus marginal relief just above. Resident individuals only.

How the zero works
₹12,00,000 slab tax = ₹60,000 (new regime) → Sec 156 rebate ₹60,000 → tax ₹0. Salaried: ₹75k std ded stretches the zero to ₹12,75,000. Special-rate income (STCG/LTCG) is excluded from rebate.
  • Old regime: same section, smaller rebate — zero only to ₹5L.
  • Marginal relief: earn slightly above ₹12L? Extra tax can't exceed extra income.
  • Not available to companies/firms — and HUFs compute plain slab tax.
₹12L zero-tax page → · Calculator →

Marginal relief (the ₹12L–₹12.5L cushion)

Example — ₹12,30,000 business income
Slab tax ≈ ₹64,500 — but that's MORE than the ₹30,000 you earned above ₹12L. Marginal relief caps your tax at roughly the extra income (₹30,000 + cess), so earning more never leaves you poorer.
  • Excluded: STCG/LTCG and other special-rate income never enter the rebate — only slab income counts.
  • Salaried edge: the ₹75,000 standard deduction is what stretches zero-tax to ₹12,75,000.
  • Old regime? Same section, smaller deal — zero only to ₹5L.

Rebate vs exemption (why this distinction matters)

Exemption means income never ENTERS the computation (like the first ₹4L — invisible). Rebate means tax is COMPUTED (₹60,000 on ₹12L) and then wiped to zero by Sec 156. Why care? Three consequences:

  • You must FILE to get it — no ITR, no rebate. Exemptions apply automatically; rebates need a return.
  • Special-rate income is fenced out — the rebate wipes slab-tax only, never the 20%/12.5% on gains. A ₹12L salary + ₹2L STCG pays full 20% on the ₹2L.
  • Marginal relief exists BECAUSE it's a rebate — to smooth the cliff at ₹12,00,001, where ₹1 of extra income would otherwise trigger ₹60,000+ of tax.
📌 Remember: old regime has its own mini-rebate
Everyone quotes the ₹12L new-regime zero — but Sec 156 also gives old-regime filers zero tax up to ₹5L taxable income (rebate ₹12,500). Senior pensioner with ₹4.8L income in old regime? Zero tax, and old's higher basic slabs may still beat new. Always compute BOTH regimes at low incomes; the answer flips more often than thumb rules admit.

By TaxSetu Editorial Team · Last reviewed: 7 October 2026

Based on the Income-tax Act 2025, Income Tax Rules 2026 and CBDT notifications; sections per the Income-tax Act 1961 (as amended) with 2025-Act mappings where notified · Verify on the official portal: incometax.gov.in

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Frequently Asked Questions

The new 87A: a ₹60,000 rebate making new-regime income to ₹12L tax-free (₹12.75L salary with standard deduction), plus marginal relief just above.

No — special-rate income like STCG/LTCG is excluded from the rebate computation. ₹12L page.

Yes, same section — but the old-regime rebate makes income tax-free only up to ₹5L.