The Financial Year (FY) 2025-26 brings a significant change in the tax rebate under Section 87A of the Income Tax Act, offering taxpayers a rebate of up to Rs 60,000 under the new tax regime. However, this increased rebate limit will be effective from FY 2025-26 (Assessment Year 2026-27) and not for the current ITR filing in 2025, which corresponds to FY 2024-25 (Assessment Year 2025-26).
Understanding Section 87A Rebate
Section 87A provides tax relief to resident individual taxpayers whose total taxable income after deductions is below a specified threshold. Essentially, it reduces the final tax liability up to the rebate limit. In the old tax regime, the rebate is capped at Rs 12,500 if your income is up to Rs 5 lakh. In the new regime, this limit was Rs 25,000 for income up to Rs 7 lakh.
Rebate Enhancements for FY 2025-26
- From FY 2025-26, the new tax regime income limit for the rebate increases substantially from Rs 7 lakh to Rs 12 lakh.
- The maximum rebate amount under Section 87A increases to Rs 60,000 in the new regime.
- This change allows taxpayers earning up to Rs 12 lakh to potentially pay zero tax after factoring in deductions like the Rs 75,000 standard deduction under the new tax regime.
Eligibility and Important Considerations
- The rebate is available only to resident individuals whose taxable income is within the prescribed threshold.
- Income from special tax rates such as Long Term Capital Gains (LTCG) or Short Term Capital Gains (STCG) is excluded from the rebate.
- The rebate is applied only after calculating the tax amount; it subtracts from tax payable, not gross income.
- Senior citizens aged 60 to 80 years are eligible; super senior citizens above 80 are not eligible.
- For FY 2024-25 (Assessment Year 2025-26), the rebate limits remain Rs 7 lakh for the new regime and Rs 5 lakh for the old regime.
Practical Filing Tips for ITR 2025
Taxpayers should carefully choose between the old and new tax regimes while filing their income tax returns to maximize benefits:
- If you do not claim deductions like under Section 80C (investments), 80D (medical insurance), or others, the new tax regime might be more beneficial due to lower tax rates and higher rebate in the future.
- Calculate your taxable income correctly, excluding capital gains income on which rebate does not apply.
- File your ITR by the extended due date of September 15, 2025, to avoid penalties and loss of rebate benefits.
How to File Your ITR for AY 2025-26
The filing process involves:
- Logging into the income tax e-filing portal.
- Selecting the correct assessment year (AY 2025-26 for FY 2024-25).
- Choosing your filing status (most taxpayers choose ‘Individual’).
- Selecting the appropriate ITR form based on income sources, e.g., ITR-1 for salaried individuals with income up to Rs 50 lakh.
- Reviewing pre-filled data such as PAN, Aadhaar, salary details, and deductions.
- Confirming and submitting the return before the deadline.
Recent Updates and Deadlines
- The ITR filing deadline for FY 2024-25 (AY 2025-26) has been extended to 15th September 2025 for non-audit taxpayers.
- Late filing penalties can be up to Rs 5,000; reduced to Rs 1,000 if total income is less than Rs 5 lakh.
- Revised returns can be filed under Section 139(5) before the belated return deadline of 31st December 2025.
Conclusion
The Rs 60,000 tax rebate under Section 87A will greatly benefit taxpayers next year once implemented for FY 2025-26 returns. Taxpayers filing their 2025 ITR corresponding to FY 2024-25 should plan based on current rebate limits (Rs 7 lakh in new regime) while preparing for changes coming into effect next year. Accurate income calculation, understanding eligibility, and timely filing are critical to optimizing tax savings.
