Mitali
Section 87A rebate is a tax benefit provided to taxpayers while filing their income tax return. Rebate u/s 87A is only available to resident individuals which includes males, females, senior citizens, and non-senior citizens, but does not extend to Foreign Persons, NRIs, HUF, AOP, BOI or entities such as companies and firms.
Rebate Limits in Different Tax Regimes
Income tax currently has two regimes: the Old Tax Regime and the New Tax Regime, each with different rebate limits for Section 87A.
| Tax Regime | Income Limit for Rebate | Basic Exemption Limit |
| Old Tax Regime | Rs 5 lakh or less |
|
| New Tax Regime | Rs 7 lakh or less | Rs 3 lakh (fixed for all) |
Thresholds for Rebate
- For Old Regime: Rebate up to Rs 12,500
- For New Regime: Rebate up to Rs 25,000
If a taxpayer's income exceeds these limits (Rs 5 lakh in Old Regime or Rs 7 lakh in New Regime), the benefit of Section 87A rebate is not available and the tax is payable as per applicable slabs.
Points To Remember
- Standard deduction under old regime is Rs 50,000 and in new regime is Rs 75,000
- For LTCG from the share market, the first Rs 1,25,000 is tax-free.
- STCG does not have any exemption or deduction and it becomes fully taxable once basic exemption is crossed.
Section 87A Rebate on Share Market Income
Generally, the benefit of Section 87A rebate is not available on special rate income.
Then how to save tax on Share Market Income?
If a taxpayer's total income falls within the basic exemption limit, you can still pay zero tax even if it includes special rate income.
Calculation
Example 1:
Suppose a person earned in FY 24-25 Rs 3,00,000 from salary, interest on FD income is Rs 20,000, LTCG from the share market is Rs 1,50,000 and STCG from share is Rs 30,000. Let's check what will be the tax on the total income?
| Particulars | Amount |
| Salary Income | Rs 3,00,000 |
| Less: Standard Deduction | (Rs 75,000) |
| Interest on FD | Rs 20,000 |
| LTCG from Share | Rs 1,50,000 |
| Less: Exemption u/s 112A | (Rs 1,25,000) |
| STCG from Share | Rs 25,000 |
| Total Income | Rs 2,95,000 |
The final tax liability will be zero because the total income is below the basic exemption limit (e.g., Rs 3 lakh in the New Tax Regime).
Example 2:
Suppose a super senior citizen earned in FY 24-25 Rs 3,00,000 from pension, interest on FD income is Rs 1,00,000, LTCG from the share market is Rs 2,00,000 and STCG from share is Rs 55,000. Let's check what will be the tax on the total income?
| Particulars | Amount |
| Pension Income | Rs 3,00,000 |
| Less: Standard Deduction | (Rs 50,000) |
| Interest on FD | Rs 1,00,000 |
| LTCG from Share | Rs 2,00,000 |
| Less: Exemption u/s 112A | (Rs 1,25,000) |
| STCG from Share | Rs 55,000 |
| Total Income | Rs 4,80,000 |
As the total income is within the basic exemption limit for super senior citizens in the old regime, no tax will be levied.
Conclusion
Section 87A offers valuable tax relief to resident individuals with moderate incomes. By understanding income limits, capital gains treatment and tax regime differences, taxpayers can effectively plan to reduce or eliminate their tax liability for FY 2024-25.
Also Know About Share Market Taxation: ITR Forms for Investors & Traders
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