Rebate under section 87A

Union Budget 2025-26 (Full) + Finance Bill, 2025

IV. Rebate under section 87A

Under the provisions of section 87A of the Act, an assessee, being an individual resident in India, having total income not exceeding Rs 5 lakh, is provided a rebate of 100 per cent of the amount of income-tax payable i.e., an individual having income till Rs 5 lakh is not required to pay any incometax.

2. Finance Act, 2023 inserted proviso to the said section, to provide rebate of income-tax in cases where the total income of such assessee is chargeable to tax under sub-section (1A) of section 115BAC. Proviso to section 87A provides the rebate of income-tax in cases of such individuals, upto Rs.25,000/- where the total income does not exceed Rs. 7,00,000/- (clause (a) of the said proviso) and marginal relief where the total income exceeds Rs. 7,00,000/- (clause (b) of the said proviso) to income chargeable to tax under sub-section (1A) of section 115BAC.

3. The provisions of sub-section (1A) of section 115BAC are subject to the other provisions of Chapter XII i.e. determination of tax in certain special cases. Hence, proviso to section 87A clearly provides that tax on incomes chargeable at special rates (for e.g.: capital gains u/s 111A, 112 etc.) as specified under various provisions of Chapter XII, are not included while determining the rebate of income-tax under the first proviso to section 87A.

4. From assessment year 2026-27 onwards, for an assessee, being an individual resident in India whose income is chargeable to tax under the sub-section (1A) of section 115BAC, it is proposed to,–

(i) enhance the limit of total income for rebate in clause (a) and (b) of first proviso under section 87A, on which the income-tax is payable as per the rates of income-tax under sub-section (1A) of section 115BAC, from Rs. 7,00,000/- to Rs. 12,00,000/- and the limit of rebate in clause (a) of first proviso to section 87A from Rs. 25,000/- to Rs. 60,000/-.

(ii) rationalise the first proviso to section 87A by inserting a new proviso so as to provide that the deduction under the first proviso, shall not exceed the amount of income-tax payable as per the rates provided in sub-section (1A) of section 115BAC.

5. Further, as mentioned in para. 4 above, such rebate of income-tax is not available on tax on incomes chargeable at special rates (for e.g.: capital gains u/s 111A, 112 etc.).

[Clauses 2, 20, 24 & the First Schedule]

Full Text:

Union Budget 2025-26 (Full) + Finance Bill, 2025

Dated: 1-2-2025