Tds + section 87a rebate

Yes, the same should be consider. As per the provision, the annual income should not exceed Rs. 5 lacs and in your given case, the same is within limit, so you can estimate average monthly tax after considering that rebate.

However, if on later date, employee furnish detail of other income not produced before, resulting increase in total income beyond Rs. 5 lacs that will result ineligibility for rebate, you has to compute revise tax liability and has to dedust balance TDS and to deduct the same on later dates.