People still say section 87A. From 1 April 2026 the rebate is section 156 of the Income-tax Act, 2025. It is a deduction from the tax, not from your income. If it is large enough, the slab tax becomes zero. It never becomes a refund by itself.
Section 156(1) is the old-regime rule. A resident individual whose total income is not more than ₹5,00,000 gets a deduction of the tax payable or ₹12,500, whichever is less. There is no marginal relief. The income tax calculator shows why that cliff matters. Salary of ₹5,50,000, after the ₹50,000 standard deduction, is total income of ₹5,00,000. The rebate is ₹12,500 and the bill is ₹0. Salary of ₹5,50,001 is one rupee over the line. The rebate is gone and the bill is ₹13,000.
Section 156(2) is the new regime, where tax is charged under section 202(1). If total income is not more than ₹12,00,000, the deduction is the tax payable or ₹60,000, whichever is less. Above ₹12,00,000, if the tax is more than the amount by which income exceeds ₹12,00,000, the extra tax is cut back. That is the marginal relief. Cess is applied after it. The Finance Bill 2026 memorandum says cess has no relief of its own.
A worked example
A salaried resident with salary of ₹12,75,000 takes the ₹75,000 standard deduction. Total income is ₹12,00,000. The rebate is ₹60,000 and the tax, cess included, is ₹0.
Move the salary to ₹13,00,000. Total income is ₹12,25,000, which is ₹12,00,000 plus a slice above it. Marginal relief is ₹38,750. Tax after the rebate, before cess, is ₹25,000. Cess is ₹1,000. The bill is ₹26,000. The relief stopped the tax at the extra income. It did not swallow the cess.
Only a resident individual gets section 156. A non-resident does not. The rebate also does not cancel tax under sections 196, 197 or 198.
Mistakes people make
- Quoting ₹12.75 lakh as the income limit for everyone. That figure is salary plus the standard deduction. Business income stops at ₹12,00,000.
- Expecting marginal relief in the old regime. One rupee over ₹5,00,000 and section 156(1) is gone.
- Subtracting the rebate from salary instead of from the tax.
- Assuming a long-term share gain is free because salary is inside the rebate.
The section
Section 156 (this was section 87A). Subsection (1) is the old regime. Subsection (2) is the new regime, including the marginal relief. Cess is outside that relief.
Run both regimes on the income tax calculator or the old versus new regime calculator. The slab guide shows where the line sits.
Questions
Is section 87A still the name on the return?
People still say 87A. From 1 April 2026 the rebate is section 156 of the Income-tax Act, 2025. A return for FY 2025-26 is still under the 1961 Act, so that year keeps the old number.
Does a salaried person get the rebate up to ₹12.75 lakh?
Salary of ₹12,75,000 minus the ₹75,000 standard deduction is ₹12,00,000 of total income. The new-regime rebate then wipes the tax. The calculator’s bill for that case is ₹0. A person with no salary does not get the standard deduction, so the line stays at ₹12,00,000.
Does the rebate remove cess on a capital gain?
It removes slab tax, and cess on that slab tax falls away with it. It does not remove tax under sections 196, 197 or 198. Cess on that special-rate tax is still charged.
Sources
Figures checked 28 Oct 2026.