Claiming Section 87A Rebate in Your ITR Filing and Maximizing Your Tax Savings
- Rashmita Choudhary
- Jul 11
- 9 min read
Tax rebates are a crucial part of the Income Tax system, offering relief to taxpayers and ensuring that they don't pay more than their fair share. One such rebate under the Income Tax Act is Section 87A, designed to provide tax relief to individuals earning within a certain income bracket. For the financial year 2025-26 (Assessment Year 2026-27), this rebate remains an essential tool for taxpayers seeking to minimize their tax liabilities. We will explore Section 87A, its eligibility criteria, the latest updates, and a step-by-step guide on how to claim the rebate in your Income Tax Return (ITR), ensuring that taxpayers can take full advantage of this benefit.
Table of Contents
What is Section 87A Rebate?
Section 87A of the Income Tax Act is a rebate that reduces the amount of tax payable by individuals. It is primarily aimed at providing relief to taxpayers with a lower taxable income. Under this section, individuals with a net taxable income below a specific threshold are eligible to claim a tax rebate. This rebate is deducted from the total tax payable, effectively reducing the tax burden.
The rebate is only applicable to individuals and Hindu Undivided Families (HUFs), and it cannot be claimed by companies, trusts, or other non-individual taxpayers. The Section 87A rebate serves as an incentive for taxpayers in the lower income bracket to save on taxes, making it an important relief measure within the Income Tax system.
For the financial year 2025-26 (Assessment Year 2026-27), the rebate under Section 87A is capped at ₹12,500, which is the same as in the previous years. This means that taxpayers who qualify for this rebate can reduce their tax liability by ₹12,500, provided their taxable income falls within the prescribed limit.
Latest Updates for FY 2025-26 (AY 2026-27)
For the financial year 2025-26 (Assessment Year 2026-27), the Section 87A rebate continues to play an essential role in reducing the tax burden for eligible taxpayers. Below are the latest updates for this rebate:
Income Threshold: To qualify for the Section 87A rebate, your net taxable income must be less than ₹5 lakh. This remains unchanged from the previous year, ensuring that individuals in the lower-income bracket benefit from the rebate.
Rebate Amount: The rebate continues to be a fixed amount of ₹12,500. This means that taxpayers with taxable income below ₹5 lakh will receive a maximum rebate of ₹12,500, reducing their overall tax liability by that amount.
New Regime Eligibility: The Section 87A rebate is available to taxpayers under both the old tax regime and the new tax regime. However, taxpayers opting for the new tax regime must not avail of other deductions like 80C, 80D, etc. under the new regime.
No Change in Rebate Cap: The cap for Section 87A remains at ₹12,500, which means taxpayers with income above ₹5 lakh are not eligible for this rebate. However, any income below ₹5 lakh will still benefit from the rebate.
Eligibility Criteria for Section 87A Rebate
To be eligible for the Section 87A rebate, taxpayers must meet specific criteria. The conditions for claiming the rebate are as follows:
Net Taxable Income: The most important criterion for eligibility is that the taxpayer’s net taxable income must be ₹5 lakh or less. This is calculated after applying all exemptions, deductions, and rebates applicable under the Income Tax Act.
Individual and HUF Status: Only individuals and Hindu Undivided Families (HUFs) can claim the rebate under Section 87A. Companies, firms, and other non-individual taxpayers are not eligible.
Taxable Income Calculation: After applying deductions like those under Section 80C (for investments), 80D (for health insurance), etc., the remaining income must be below ₹5 lakh for the taxpayer to qualify for the rebate.
Income Exceeding ₹5 lakh: Taxpayers with taxable income exceeding ₹5 lakh will not be eligible for the Section 87A rebate, even if their income is just over the threshold.
It’s essential for taxpayers to accurately calculate their taxable income to determine if they meet the eligibility requirements for this rebate. Taxpayers should consult a tax professional or use a reliable platform like TaxBuddy for precise calculations.
Step-by-Step Guide: How to Claim Section 87A Rebate in Your ITR
Claiming the Section 87A rebate is a straightforward process. Here’s how to claim it while filing your ITR:
Determine Eligibility: Ensure that your net taxable income is below ₹5 lakh after accounting for all deductions and exemptions.
Select the Right ITR Form: Choose the appropriate ITR form (e.g., ITR-1 for salaried individuals) based on your income type. The form will prompt you to enter details like income, deductions, and rebates.
Enter Details of Income and Deductions: In your ITR form, input all relevant income details (salary, business income, etc.) and claim applicable deductions like 80C, 80D, etc.
Claim the Rebate: When you fill out your ITR, you will come across a section where you can claim Section 87A rebate. Enter the amount of rebate you are eligible for, which is ₹12,500 if your taxable income is below ₹5 lakh.
Submit Your ITR: After filling in all details, including the rebate, submit your ITR through the Income Tax Department’s portal or using a reliable tax filing platform like TaxBuddy.
Verify and E-Verify: Ensure that all the details are correct before submitting. After submission, e-verify your return to complete the filing process.
Maximizing Your Tax Savings with Section 87A Rebate
Section 87A is a great way to reduce your tax liability, but to fully benefit from it, taxpayers need to consider how they can maximize their overall tax savings. Here are some strategies:
Optimize Deductions: Ensure that you have claimed all available deductions under Sections 80C, 80D, 80G, and others to reduce your taxable income. The lower your taxable income, the higher the rebate you can claim.
Maximize Tax-saving Investments: Invest in tax-saving instruments like PPF, ELSS, and NPS under Section 80C, and consider health insurance premiums for deductions under Section 80D.
Review Your Income Structure: Adjust your income sources, if possible, to ensure your net taxable income stays below ₹5 lakh. For instance, consider salary restructuring to include tax-free allowances, which can reduce your taxable income.
Use Tax Filing Platforms: Platforms like TaxBuddy help in automatically applying eligible rebates, ensuring that you don’t miss out on deductions or the Section 87A rebate. They also help calculate the exact amount of rebate you can claim based on your total taxable income.
By combining Section 87A with other deductions and exemptions, you can maximize your tax savings and potentially reduce your overall tax burden significantly.
Revised Returns and Missing the Rebate
If you have already filed your ITR without claiming the Section 87A rebate or made an error in reporting, you can still correct it by filing a revised return. Here’s how it works:
File a Revised Return: If you missed claiming Section 87A during the initial filing, you can file a revised return before the end of the assessment year. The revised return allows you to correct mistakes or add missing rebates.
Make the Correction: In your revised return, include the Section 87A rebate. Ensure your taxable income remains below ₹5 lakh to qualify for the rebate.
Impact on Refund: If you are due for a refund, the corrected rebate will reduce your tax liability, and you may receive a larger refund.
It’s crucial to act within the assessment year to take advantage of this opportunity. If you miss this window, you may lose out on the rebate for that year.
Conclusion
Section 87A of the Income Tax Act is a valuable tool for taxpayers with a net taxable income below ₹5 lakh. For the financial year 2025-26 (Assessment Year 2026-27), the rebate continues to provide tax relief of ₹12,500, reducing the overall tax burden for eligible individuals. By claiming the rebate through the correct ITR form and ensuring your income falls under the threshold, you can maximize your tax savings. Additionally, using platforms likeTaxBuddy Mobile Appensures that you don’t miss out on any eligible deductions or rebates, streamlining the entire tax filing process.
For those who may have missed the rebate or made errors in their initial filing, the option to file a revised return provides an opportunity to correct and claim the rebate. Make sure to file on time and make the most of the tax-saving benefits available to you.
Frequently Asked Question (FAQs)
Q1: What is Section 87A of the Income Tax Act?
Section 87A of the Income Tax Act provides a rebate of up to ₹12,500 for taxpayers whose net taxable income is below ₹5 lakh. This rebate helps lower the overall tax liability for eligible individuals. For example, if your taxable income is ₹5 lakh or less, you can avail of this rebate, resulting in a reduction of up to ₹12,500 in the taxes payable, thus making it a significant benefit for low-income taxpayers.
Q2: How do I qualify for the Section 87A rebate?
To qualify for the Section 87A rebate, your net taxable income must be less than ₹5 lakh. Additionally, you must be an individual taxpayer; this rebate is not available to Hindu Undivided Families (HUFs), corporations, or other entities. Make sure to file the correct ITR form and meet any other criteria set by the Income Tax Department for claiming the rebate.
Q3: How do I claim the Section 87A rebate in my ITR?
To claim the Section 87A rebate, you need to fill in the relevant section in the ITR form, which is typically auto-calculated when your taxable income is below ₹5 lakh. The system will automatically apply the rebate if you meet the eligibility criteria, ensuring that your tax liability is reduced accordingly. Ensure you are using the correct ITR form and have filled out your income details accurately to benefit from this rebate.
Q4: Can I file my ITR after the deadline and still claim the rebate?
Yes, you can still file your ITR after the deadline, but if you miss the original due date, you must file a belated return by December 31, 2025, for FY 2024-25. Filing after the deadline will incur penalties, and the processing of your refund may be delayed. It’s important to ensure that your return is filed correctly, including the Section 87A rebate, even if done late.
Q5: How does TaxBuddy help with claiming the Section 87A rebate?
TaxBuddy helps claim the Section 87A rebate by automatically calculating it when your taxable income is below ₹5 lakh. The platform simplifies the process, ensuring that the rebate is applied accurately during filing, reducing the chances of errors. TaxBuddy's AI-driven system ensures you benefit from all applicable deductions, exemptions, and rebates, including Section 87A, helping you save on taxes.
Q6: What if I missed the Section 87A rebate in my initial filing?
If you missed claiming the Section 87A rebate in your initial filing, you can rectify the mistake by filing a revised return before the end of the assessment year (December 31, 2025). By doing so, you can claim the missed rebate and correct any other discrepancies, ensuring that your tax filings are accurate and complete.
Q7: What documents do I need to file my ITR?
To file your ITR, you will need several key documents, including:
Form 16 (for salaried individuals), which includes details of your salary, TDS deducted, and other important tax-related information.
Proof of TDS deductions, including your Form 26AS, which outlines taxes deducted at source.
Bank statements, particularly for interest income, capital gains, and other sources of income.
Deductions under sections like 80C and 80D, such as receipts for investments in PPF, life insurance premiums, and medical insurance premiums.
Having these documents ready will ensure a smooth filing process.
Q8: Can I file my ITR without professional help?
Yes, you can file your ITR without professional help using TaxBuddy’s self-filing option. The platform guides you step-by-step through the filing process, providing clarity on the forms and the necessary information required. It also offers checks and validations to ensure your return is filed correctly, making it easy for individuals to handle their own tax filings.
Q9: How long does it take for the ITR to be processed and refund issued?
Once you file your ITR, it typically takes between 15 to 45 days for the Income Tax Department to process your return. Refunds are usually issued soon after processing, but delays can occur during high filing periods or if your return is selected for further scrutiny. Filing early ensures quicker processing and faster refunds.
Q10: Is the Section 87A rebate available under the new tax regime?
No, the Section 87A rebate is not available under the new tax regime. This rebate is specifically available under the old tax regime. If you opt for the new tax regime, you won’t be able to claim this rebate, though the new regime offers lower tax rates in exchange for giving up most deductions and exemptions.
Q11: What happens if I don’t claim the Section 87A rebate?
If you don't claim the Section 87A rebate and you are eligible for it (i.e., your taxable income is below ₹5 lakh), you will miss out on the chance to reduce your tax burden by ₹12,500. Ensure that you carefully review your tax filing and claim all eligible rebates and deductions to avoid paying more tax than necessary.
Q12: How can TaxBuddy assist me in maximizing my tax savings?
TaxBuddy helps you maximize your tax savings by automatically calculating and applying all eligible deductions, exemptions, and rebates, including Section 87A. The platform uses AI to optimize your ITR, ensuring you don’t miss out on any tax-saving opportunities, and that your return is filed accurately. TaxBuddy also offers expert assistance, providing personalized advice to help you make the most of available tax benefits.
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