Section 87A Marginal Relief Calculator 2025 (FY 2025–26 Revised Slabs)

What is Section 87A Rebate?

Section 87A is a tax relief provision under the Income Tax Act that benefits resident individuals earning income below a certain threshold. Under the new tax regime, if your taxable income is ₹12,00,000 or less, you can claim a rebate that typically results in zero income tax.

In simple terms, the government doesn't want you to pay income tax if you're a middle-income earner. Section 87A is the mechanism that makes this possible. Instead of paying tax, you get a rebate that covers your entire tax liability.

The Section 87A marginal relief calculator 2025 is designed to help you instantly calculate how much tax you'll actually pay after this rebate is applied. It's especially useful near the ₹12 lakh threshold where things get interesting with marginal relief benefits.

Section 87A Rebate Limit FY 2025–26 (Budget Update)

For FY 2025–26 (Assessment Year 2026–27), the Section 87A rebate limit FY 2025–26 is set at ₹12,00,000 for resident individuals. This is the income threshold updated by the Budget.

Here's how it works: If your taxable income is ₹12,00,000 or less, you get a rebate equal to the lower of:

• Your actual tax calculated, OR
• ₹60,000 (the maximum rebate limit)

For most salaried individuals below this threshold, the actual tax is already lower than ₹60,000, so the entire tax gets wiped out. You end up paying zero tax.

There's an additional benefit: salaried employees get a standard deduction of ₹75,000, which means your effective zero-tax income extends up to ₹12,75,000. This is why even earning slightly above ₹12 lakh isn't necessarily problematic—you still might owe no tax.

What is Marginal Relief and Why is it Needed?

Imagine earning exactly ₹12,00,001 (just ₹1 more than the rebate threshold). Without marginal relief, your tax could jump significantly. This creates what's called a "tax cliff"—earning slightly more income results in disproportionately higher tax.

Marginal relief solves this problem. It ensures that when your income exceeds ₹12,00,000, the marginal relief under new tax regime kicks in to protect you from this cliff effect.

Here's the principle: Your tax payable should never exceed the amount you earned above ₹12 lakh. So if you earn ₹12,10,000, your tax can't exceed ₹10,000 (the amount above the threshold).

This is a fairness mechanism. The government recognizes that earning slightly more shouldn't suddenly make your tax burden unreasonably high. Marginal relief prevents that situation.

How Marginal Relief Works Above ₹12,00,000

When your taxable income exceeds ₹12,00,000, here's the key rule: Tax payable above ₹12,00,000 cannot exceed the excess income itself.

Let's break this down with the calculation method:

This is where the Section 87A marginal relief calculator 2025 becomes invaluable. It automatically applies this rule and shows you the exact tax you'll pay without worrying about the complex calculations.

The benefit is automatic—you don't need to claim it separately. Once your income crosses ₹12 lakh, the calculator (and tax department) will apply this relief for you.

Revised Income Tax Slabs 2025 (New Regime Overview)

The revised income tax slabs 2025 under the New Tax Regime are more favorable than the Old Regime. These slabs apply to FY 2025–26:

Notice how the first ₹4 lakh is tax-free. For salaried employees, add the ₹75,000 standard deduction on top of these slabs, which further reduces your taxable income.

These slabs are lower and more beneficial than the Old Regime, which is why the New Regime is now default for most taxpayers. The combination of these lower slabs, standard deduction, and Section 87A rebate creates significant tax savings for middle-income earners.

How the Section 87A Marginal Relief Calculator 2025 Works

The Section 87A marginal relief calculator 2025 is built to handle all the complexity automatically. You provide simple inputs, and it calculates your exact tax liability with all reliefs applied.

What you input:

• Your Taxable Income (₹): This is your total income after standard deduction (if salaried) and other applicable deductions
• Salaried Status (Yes/No): This helps the calculator provide context about the ₹75,000 standard deduction

What the calculator shows:

• Tax Before Rebate: Your tax calculated using the New Regime slabs
• Section 87A Rebate Applied: The actual rebate you receive (usually up to ₹60,000)
• Marginal Relief Benefit: Additional relief if your income exceeds ₹12 lakh
• Final Tax Payable (Before Cess): Your tax after all reliefs
• Final Tax Payable (Including 4% Cess): The absolute final amount you owe (includes Health & Education Cess)

It also shows a slab-wise breakdown so you understand exactly how your tax is calculated. This transparency helps you see where your money is being taxed and why.

Practical Examples: Marginal Relief Tax Calculation

Understanding with real numbers is easier. Here are three practical scenarios showing how Section 87A rebate and marginal relief work:

These examples show why marginal relief tax calculation is so important. Without it, earning ₹10,000 more would cost you ₹1,500+ in tax. With marginal relief, your tax increases by only ₹10,000 (plus cess)—exactly matching your income increase.

Common Mistakes Taxpayers Should Avoid

When dealing with Section 87A rebate and marginal relief, many people make errors. Here are the most common ones:

• Assuming tax increases sharply just above ₹12 lakh: Many believe earning ₹12,00,001 triggers massive tax. False. Marginal relief prevents this. Your tax increase is proportional to your income increase.
• Not understanding marginal relief benefit: Some taxpayers don't realize they're getting a relief and think their tax is incorrect. The calculator shows marginal relief explicitly so you understand the benefit.
• Confusing gross income with taxable income: Your gross salary is different from taxable income. Standard deduction, home loan interest, and other deductions reduce your taxable income. The calculator asks for taxable income, not gross salary.
• Forgetting to include 4% Health & Education Cess: Your final tax includes 4% cess on top. This is mandatory and applies to all taxpayers. The calculator automatically includes it in the final amount.
• Thinking rebate and marginal relief are optional: Both are automatic. Once you file your ITR, the tax department applies these reliefs. You don't need to claim them separately.
• Ignoring standard deduction for salaried income: If you're salaried, ₹75,000 standard deduction reduces your taxable income directly. This is why salaried employees often pay less tax than self-employed individuals with the same gross income.

FAQs on Section 87A Marginal Relief (2025)

Final Summary: Simplifying Tax at the ₹12 Lakh Threshold

Section 87A rebate and marginal relief are government provisions designed to protect middle-income taxpayers. For anyone earning up to ₹12 lakh (or ₹12.75 lakh as a salaried employee), these provisions typically result in zero income tax.

For those earning slightly above these thresholds, marginal relief prevents the "tax cliff" effect. Your tax increases proportionally with your income—not disproportionately.

The Section 87A marginal relief calculator 2025 makes calculating your exact tax liability simple and transparent. Instead of struggling with slab calculations and relief rules, you get instant, accurate results.

Ready to check your tax liability? Use the calculator above to enter your taxable income and see:

• Your tax before any relief
• How much Section 87A rebate saves you
• Whether marginal relief applies to your income
• Your exact final tax payable (including cess)
• Slab-wise breakdown of your tax

Knowledge is power when it comes to taxes. Understanding how rebate and marginal relief work empowers you to make better financial decisions and plan your income strategically.