Section 87A Rebate: How Income up to ₹12 Lakh Becomes Tax-Free
Under the new regime, taxable income up to ₹12 lakh attracts zero tax thanks to the rebate (now Section 156). With the ₹75,000 standard deduction, salaried individuals pay nothing up to ₹12.75 lakh. But this is a rebate, not an exemption — the difference matters.
First, the Concept: Exemption vs Rebate
Act 1961 (Old)
Exemption / Deduction: reduces your income before tax is computed. Example: the ₹75,000 standard deduction turns a ₹12.75L salary into ₹12L of taxable income.
Act 2025 (New)
Rebate: tax is computed in full, then the government says "if your income is within ₹12L, we waive it". Amount: relief up to ₹60,000 (Section 156).
• Taxable = 12,75,000 − 75,000 (std deduction) = ₹12,00,000
• Slab tax: ₹4–8L @5% = ₹20,000 + ₹8–12L @10% = ₹40,000 → ₹60,000
• Rebate u/s 156 = ₹60,000 (the full amount, since the cap is ₹60k)
• Tax payable = ₹0 (no cess either — 4% of zero is zero)
Marginal Relief rule: the tax cannot exceed the income above ₹12 lakh.
• Excess over 12L = ₹10,000
• Tax = min(₹61,500, ₹10,000) = ₹10,000 + 4% cess = ₹10,400
Rohit pays ₹10,400, not ₹61,500.
Keep These 4 Things in Mind
- The rebate applies only to normal slab-rate income. Special-rate income (equity STCG @20%, lottery @30%, crypto @30%) gets no rebate
- The ₹12L limit applies to taxable income (after all deductions), not gross salary
- The old regime has its own rebate — taxable income up to ₹5 lakh, max rebate ₹12,500
- Marginal relief is automatic — the portal computes it for you
• Salary tax: ₹0 (rebate)
• Crypto profit ₹1L @ 30% = ₹30,000 + cess = ₹31,200 — no rebate
Total tax = ₹31,200. Special-rate income is always taxed separately.
Check it on your own income
Open the CalculatorBy 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