With Budget 2026 just around the corner, many taxpayers have been focusing on whether the Finance Ministry will increase the income tax rebate on February 1, 2026? Taxpayers following both the old and new tax regimes get a tax rebate under Section 87A of the Income Tax Act, 1961. While the rebate is different under both tax regimes, many taxpayers expect the government to increase its limit.
In this write-up, ET Wealth Online will explain what is the income tax rebate limit under the old and new tax regimes? Who is eligible to get it and what are the expectations of experts related to the rebate from Budget 2026?
What is the tax rebate under Section 87A and what are its limits in the old and new tax regimes? Sanjay Kumar, director, Nangia Global, explains the Income Tax Act, 1961, provides relief to residents through a rebate mechanism under Section 87A, which effectively reduces tax liability to nil up to a prescribed income threshold.
“Under the old tax regime, a rebate of up to Rs 12,500 is available for individuals with total income not exceeding Rs 5 lakh, while the new tax regime offers a higher rebate of up to Rs 60,000 for income up to Rs 12 lakh, thereby providing enhanced relief to middle-income taxpayers, says Kumar.
Tax rebate limit under old and new tax regimes Tax regime
Taxable income limit for rebate Maximum rebate available Effective tax payable New tax regime Up to Rs 12 lakh Up to Rs 60,000 Zero Old tax regime Up to Rs 5 lakh Up to Rs 12,500 Zero Abhishek Soni, founder and CEO, Tax2Win, says, “Section 87A rebate is a tax relief given to resident individuals to reduce their income tax. It is not a deduction from income — it is a direct reduction in the tax payable. I
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