What is Section 87A rebate in FY 2025-26?

Section 87A gives a rebate of up to ₹60,000 under the New Regime if taxable income is ≤ ₹12 lakh, making final tax zero. Under Old Regime the rebate is ₹12,500 for income ≤ ₹5 lakh.

Who is eligible for Section 87A?

Individual resident taxpayers whose taxable income does not exceed ₹12 lakh (New Regime) or ₹5 lakh (Old Regime). HUFs and companies are not eligible. Does not apply to special-rate incomes like capital gains at flat rates.

Is income up to ₹12 lakh completely tax free under New Regime?

For salaried individuals yes — effectively. With the ₹75,000 standard deduction, a gross salary of ₹12.75 lakh gives exactly ₹12 lakh taxable income, which attracts zero tax after the 87A rebate.

What happens if income crosses ₹12 lakh by a small amount?

You lose the full 87A rebate, but marginal relief applies. Your tax is capped at the income above ₹12 lakh. So at ₹12.5 lakh taxable income, tax is ₹50,000 + 4% cess, not the full ₹86,528 that would normally apply.

Does Section 87A apply to capital gains?

No. Section 87A rebate does not apply to special-rate income like STCG under Section 111A or LTCG under Section 112A. Even if total income is below ₹12 lakh, tax on such gains must be paid separately.

FY 2025-26 · AY 2026-27

Income Tax Calculation Step by Step — India FY 2025-26

From gross salary to final tax payable — the complete calculation process with real numbers. Both Old and New Regime covered with a worked example.

✓ New Regime — Lower Rates

Old Regime — More Deductions

The 6 Steps to Calculate Your Income Tax

Indian income tax follows a fixed sequence. Here's the exact order — skip a step and you'll get the wrong number:

Step	What You Do
Step 1	Add all income sources → Gross Total Income
Step 2	Subtract standard deduction + eligible deductions → Taxable Income
Step 3	Apply slab rates to taxable income → Base Tax
Step 4	Apply Section 87A rebate if eligible → Tax After Rebate
Step 5	Add surcharge if total income > ₹50L → Tax + Surcharge
Step 6	Add 4% cess on (tax + surcharge) → Final Tax Payable

Full Example: ₹14 Lakh Salary — New Tax Regime

Step	Amount
Gross Salary	₹14,00,000
Standard Deduction (New Regime)	− ₹75,000
Taxable Income	₹13,25,000
Tax on ₹0–₹4,00,000 (0%)	₹0
Tax on ₹4,00,001–₹8,00,000 (5%)	₹20,000
Tax on ₹8,00,001–₹12,00,000 (10%)	₹40,000
Tax on ₹12,00,001–₹13,25,000 (15%)	₹18,750
Base Tax	₹78,750
Section 87A Rebate (taxable income > ₹12L — not eligible)	₹0
Surcharge (income < ₹50L)	₹0
Cess (4% on ₹78,750)	₹3,150
Final Tax Payable	₹81,900

Same Salary Under Old Tax Regime (No Investments)

Step	Amount
Gross Salary	₹14,00,000
Standard Deduction (Old Regime)	− ₹50,000
Taxable Income	₹13,50,000
Tax on ₹0–₹2,50,000 (0%)	₹0
Tax on ₹2,50,001–₹5,00,000 (5%)	₹12,500
Tax on ₹5,00,001–₹10,00,000 (20%)	₹1,00,000
Tax on ₹10,00,001–₹13,50,000 (30%)	₹1,05,000
Base Tax	₹2,17,500
Cess (4%)	₹8,700
Final Tax Payable	₹2,26,200

✓ Verdict at ₹14L Salary

New Regime saves ₹1,44,300 at ₹14L salary without any investments. The Old Regime needs over ₹4 lakh in combined deductions to come close. For most salaried people without home loan interest or large HRA, the New Regime wins clearly at this income level.

⚠ Remember: All Income Sources Count

Tax is calculated on income from all sources — salary, FD interest, rent received, freelance income. Many people forget to add bank interest and rental income, then face a surprise during ITR filing. Always total all income before assuming you're in the zero-tax zone.

💡 The Rebate Cliff at ₹12L

If your taxable income is ₹12L or below, the 87A rebate makes tax ₹0. Cross ₹12L by ₹1 and you owe ~₹83,200. This is why keeping taxable income at or below ₹12L is a major planning priority for salaried Indians in FY 2025-26. Check our Tax Calculator to see your exact position.

Calculate Your Exact Tax in 30 Seconds

Skip the manual steps — enter your salary and deductions and get the precise result instantly.

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Frequently Asked Questions

How do I calculate my income tax step by step in India?

Gross income → subtract standard deduction and other eligible deductions → apply slab rates → check 87A rebate → add surcharge if income > ₹50L → add 4% cess. The result is your final tax. Use our Tax Calculator to do this automatically in seconds.

What is the income tax slab for FY 2025-26 under New Regime?

₹0–4L: 0% | ₹4–8L: 5% | ₹8–12L: 10% | ₹12–16L: 15% | ₹16–20L: 20% | ₹20–24L: 25% | Above ₹24L: 30%. Section 87A rebate makes effective tax ₹0 for taxable income up to ₹12L. Add 4% cess on total tax after rebate.

How much tax on ₹14 lakh salary in FY 2025-26?

New Regime: ₹14L minus ₹75,000 standard deduction = ₹13.25L taxable. Tax = ₹78,750 + 4% cess = ₹81,900. Old Regime without deductions: ₹2,26,200. New Regime saves ₹1,44,300 at this income level.

What is the difference between gross income and taxable income?

Gross income is everything you earn — salary, rent, interest, freelance. Taxable income is what remains after subtracting the standard deduction, HRA exemption (Old Regime only), 80C investments, and other eligible deductions. Tax is calculated only on taxable income, not gross income.

What is cess and when does surcharge apply?

Cess is 4% on total tax — always applies. Surcharge is an extra levy for high incomes: 10% above ₹50L, 15% above ₹1Cr, 25% above ₹2Cr. Under New Regime, surcharge is capped at 25%. Cess is charged on (base tax + surcharge) combined.

Explore Related Tax Guides

Now that you understand the full calculation process, explore the individual components: