India
India Section 87A rebate and marginal relief
6 min read · Last updated 1 November 2026 · Tax Globy editorial team
The Section 87A rebate is the reason a salaried income of INR 12,75,000 can be free of income tax in FY 2026-27. The rebate reduces the tax itself rather than taxable income, and a marginal relief rule stops it from creating a cliff just above the threshold. This guide explains both.
The rebate under Section 87A
For FY 2026-27 the new regime gives a rebate of up to INR 60,000 where taxable income is up to INR 12,00,000. The rebate reduces the tax bill itself, not taxable income.
With the standard deduction of INR 75,000, a salaried taxpayer with income up to INR 12,75,000 can therefore pay no income tax at all, because taxable income stays at or below the threshold.
The old regime rebate
The old regime keeps a smaller rebate: INR 12,500 where taxable income is up to INR 5,00,000. With the old standard deduction of INR 50,000, salaried income up to INR 5,50,000 can be tax-free.
The two regimes therefore have different free zones as well as different slabs. Comparing them on the slabs alone understates the difference at the lower end.
Run your own numbers
The calculator applies the rates described in this guide and shows the band-by-band breakdown.
Open the India calculatorMarginal relief just above the threshold
A rebate that stops at a threshold creates a cliff: a small amount of extra income could otherwise produce a large jump in tax. Marginal relief prevents that by capping the tax at the amount of income above the threshold.
Take taxable income of INR 12,10,000 in the new regime. The slab calculation gives INR 61,500, while the income above INR 12,00,000 is INR 10,000. Marginal relief reduces the tax to INR 10,000, so the extra income is not taxed more than itself.
Cess after rebate and surcharge
A health and education cess of 4% applies to the tax after the rebate and after any surcharge. It is charged on the amount actually payable, so a rebate that removes the tax also removes the cess.
The order matters: rebate first, then surcharge where it applies, then cess on the result. Applying the cess to the tax before the rebate would overstate the bill.
Worked example: INR 15,00,000
Take a salary of INR 15,00,000 in the new regime with no other income. The standard deduction of 75,000 leaves taxable income of INR 14,25,000, which is above the rebate threshold.
The slab tax is INR 93,750: 5% on the slice from 4,00,000 to 8,00,000, 10% on the next 4,00,000, and 15% on the remaining 2,25,000. The cess is INR 3,750, so the total is INR 97,500.
| Item | Amount (INR) |
|---|---|
| Gross salary | 15,00,000 |
| Standard deduction | 75,000 |
| Taxable income | 14,25,000 |
| Tax before cess | 93,750 |
| Cess at 4% | 3,750 |
| Total tax | 97,500 |
Estimates for general guidance, not tax advice.
Checking the free-zone figure
The INR 12,75,000 figure is not a slab threshold. It is the point where the standard deduction leaves taxable income exactly at the rebate limit of INR 12,00,000, so it holds only for a salaried taxpayer with no other income.
Add any other income and the free zone shrinks. Remove the standard deduction, for example on non-salary income, and the limit falls back to INR 12,00,000. The number to watch is taxable income, not gross.
What the estimate leaves out
The calculation applies the standard deduction, the slabs, the rebate and the cess. It does not apply other deductions, exemptions or the surcharge that can apply at high incomes.
Under the old regime, deductions such as Section 80C investments and health insurance premiums can change the comparison a great deal. Use the figures for planning and confirm the result with your own return, and remember that the regime choice is made for each year, so a comparison is only meaningful when both sides use the same income and the same tax year.
Common questions
Is income up to INR 12,75,000 always tax-free?
Not always. The figure assumes salary income, the INR 75,000 standard deduction and no other income, which leaves taxable income at the INR 12,00,000 rebate limit.
How does marginal relief work?
Just above the threshold the tax is capped at the amount by which income exceeds the threshold, so a small rise in income cannot produce a large jump in tax.
Does the cess apply before or after the rebate?
After. The 4% cess is charged on the tax that remains after the rebate and any surcharge.
What is the old regime rebate?
INR 12,500 where taxable income is up to INR 5,00,000, with a standard deduction of INR 50,000.
Written and maintained by the Tax Globy editorial team
Tax Globy is an independent calculator project. Every rate, threshold and deduction is checked against the published official source listed on the page, and each page shows when it was last reviewed.
Last reviewed 1 November 2026 · Estimates only, not tax advice.
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