87A rebate is Rs. 25,000. But Tax amount is 20,000 (FY 2024-25)

Income Tax Tax Savings & Deductions
1

Hi,

Under new regime, tax upto Rs. 7,00,000 works out to Rs. 20,000 as follows:

  • Upto Rs. 3,00,000: Tax = NIL
  • 3,00,001 to 7,00,000 : Tax = 20,000 (4,00,000 * 5%)
  • Total Tax = 20,000

A resident individual (whose net income does not exceed Rs. 7,00,000) can avail rebate under section 87A. But rebate amount of 25,000 exceeds the actual tax (as worked out above) ? Why the difference ?.

2

Hi @radhesh23k,

The rebate of ₹25,000 u/s 87A under the new tax regime was announced in 2023’s budget. Back then, the tax slabs under the new regime were different, and according to those anyone with an income of ₹7L would have a tax liability of ₹25,000. Hence, the rebate limit was kept to this amount.

However, the tax slabs under the new regime were revised again in this year’s budget. According to the new slabs, your calculation is correct. Someone with a taxable income of ₹7L will have a tax liability of ₹20,000 and hence, this will also be the maximum amount of rebate one can claim.