ITR Filing 2026: What Is Section 87A Rebate, Eligibility, Limits and How To Claim It

The income-tax department has notified all ITR forms 1-5 for assessment year 2026-27, that is, financial year 2025-26, and enabled the excel utility facility for the online ITR-1 (Sahaj), ITR-2, ITR-3, and ITR-4 (Sugam) forms for this tax year (AY27 / FY26).

Availability of the excel utility means taxpayers can first prepare their returns offline before uploading them digitally. The deadline for filing taxes is July 31, which can be done by logging into the e-filing portal with a User ID and password.

What Is Rebate Under Section 87A

Unlike tax exemptions and tax deductions, income tax rebate is claimed from the total tax payable under Section 87A. The facility reduces tax for low to middle-income earners, with different income limits applicable under the old tax regime and the new tax regime.

It is separate from other exemptions and deductions offered under the old and new tax regimes. A key point of differentiation is that deductions are offered under various sections under the Income-Tax Act, while rebate is available only under Section 87A, and exemptions are provided on sources of income as defined in the laws. How To Register and Log In on the Income Tax Portal? 

Currently, Section 87A allows individuals to claim a rebate of up to INR 12,500 under the old tax regime and up to INR 60,000 under the new tax regime.

Limit And Rules: How Much Rebate Can Taxpayers Claim

Rebate reduces tax dues by deducting a fixed amount from the calculated payable tax for middle to low-income earners, including individuals within the 10 percent tax slab bracket. Under the old regime, a rebate of INR 12,500 is allowed for an income up to INR 5 lakh, while the new tax regime allows a rebate of INR 60,000 for income up to INR 12 lakh. Income Tax Return Calendar: Check Category-Wise ITR Filing Deadlines for AY 2026–27.

According to Clear Tax, rebate can be applied to the total tax before adding a health and education cess of 4 percent.

Further, rebate is only allowed for individuals. Companies and Hindu Undivided Families (HUFs) cannot claim this facility. Non-resident Indians (NRIs) are also not eligible for a rebate under 87A.

Rebate cannot be claimed against long-term capital gains (LTCG) under Section 112A of the I-T Act, which deals with profits from shares, and short-term capital gains (STCG) under Section 111A of the I-T Act, which also deals with profits from shares.

Taxpayers are also not allowed to claim rebate on income taxed at special rates, such as winnings from lottery and game shows.

How To Claim Rebate In ITR Filing

Compute your gross total income for the financial year.

Once you have the total, exclude exemptions and deductions as applicable for investment and tax savings.

Declare your total taxable income in ITR after factoring in deductions.

Claim rebate under Section 87A for income within the prescribed limits mentioned above.

The Income-Tax Department reportedly allows taxpayers to claim rebate in the updated ITR forms, ITR-2 and ITR-3.

ITR: Marginal Relief Explained

Under the new tax regime, for individuals whose income exceeds the INR 12 lakh limit by a slight gap, and where the tax exceeds the income over the cap, the tax is limited to income exceeding INR 12 lakh, according to the Clear Tax report. This is called the marginal relief facility.

For example, for an income of INR 12.15 lakh, the income over the limit is INR 15,000. For the full income, the tax would work out to INR 62,250. But with marginal relief factored in, since the tax exceeds the income over limit (62,250 is greater than 15,000), the difference is calculated as rebate (62,250 minus 15,000 equals 47,250).

Thus, the tax liability would be calculated as tax minus rebate (62,250 minus 47,250) equals payable tax of INR 15,000, plus health and education cess at 4 percent, totalling INR 15,600. This effectively brings down the tax liability from INR 62,250 to INR 15,600.

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(The above story first appeared on LatestLY on Jun 28, 2026 03:50 PM IST. For more news and updates on politics, world, sports, entertainment and lifestyle, log on to our website latestly.com).