Rebate & Surcharge / Marginal Relief – FAQs

From Rebate to Relief: FAQs on Rebate Under Section 87A, Surcharge Slabs & Marginal Relief

When your total income moves across tax thresholds, rebate and surcharge rules decide how much tax you actually pay.
These FAQs explain the latest rebate under Section 87A , surcharge & marginal relief provisions for individuals, HUFs, firms and companies — as per FY 2024-25 (AY 2025-26).

Want more resources. Please explore our resources FAQ Hub and Tools Hub.

Frequently Asked Questions-Rebate under Section 87A & Surcharge

Section 87A gives a rebate (tax relief) to resident individuals whose total income does not exceed a prescribed limit. It directly reduces the tax payable after computation.

Under the new tax regime (Section 115BAC), full rebate is available upto INR 60,000 if total income does not exceed ₹12,75,000 (after the ₹75,000 standard deduction).
Under the old regime, full rebate up to ₹12,500 is available if total income does not exceed ₹5,00,000.
This means:
✅ Old regime → Effective zero tax up to ₹5 lakh.
✅ New regime → Effective zero tax up to ₹12.75 lakh (approx).

Only resident individuals in India can claim it.
HUFs, firms, companies, and NRIs are not eligible for this rebate.

Rebate = Tax payable before rebate – Rebate limit under law (up to ₹12,500 in old regime, or full tax for income ≤ ₹12.75 lakh under new regime).
Rebate applies after considering all deductions, but before surcharge and cess.

A surcharge is an additional tax levied on the amount of income-tax payable when income exceeds certain thresholds — effectively, a tax on tax.

Individuals, HUFs, firms, LLPs, and companies pay surcharge if their total income exceeds specified limits under the Income-tax Act. The rates differ for individuals, companies, and special categories (like capital gains).

Under Finance Act 2025:

  • 10% – Income > ₹50 lakh up to ₹1 crore
  • 15% – Income > ₹1 crore up to ₹2 crore
  • 25% – Income > ₹2 crore up to ₹5 crore (except where 15% cap applies to certain capital gains)
  • 37% – Income > ₹5 crore (also subject to capped rate on certain capital gains)
    Note: The maximum surcharge on income taxable under certain capital-gain sections (111A, 112, 112A) is capped at 15%.

Yes. Under the new regime (Section 115BAC), the maximum surcharge on income (including salary and other heads) is capped at 25%, even for incomes above ₹5 crore, making it more beneficial for high-income taxpayers.

It is applied on the amount of income tax computed (before health & education cess).
For example, if your total tax is ₹10 lakh and you fall in the 10% surcharge bracket, surcharge = ₹1 lakh → Total before cess = ₹11 lakh.

Marginal relief ensures that the additional tax (including surcharge) payable does not exceed the amount of income exceeding the threshold that triggered the surcharge.
It prevents unfair tax jumps at surcharge thresholds.

Suppose total income = ₹50,10,000 → base tax = ₹12,50,000.
Surcharge @10% = ₹1,25,000.
But extra income over ₹50,00,000 = ₹10,000.
If surcharge increases tax by more than ₹10,000, marginal relief reduces it so that tax increase = extra income only.

Yes. The Income Tax utility and online portal auto-compute marginal relief when applicable. No separate claim or form is required.

Yes, at different thresholds:

  • Firms/LLPs → 12% if income exceeds ₹1 crore.
  • Domestic companies → 7% (income > ₹1 crore ≤ ₹10 crore); 12% (> ₹10 crore).
  • Foreign companies → 2% (income > ₹1 crore ≤ ₹10 crore); 5% (> ₹10 crore).

Yes. Health & Education Cess @4% is levied on income tax + surcharge.

Rebate applies before surcharge and cess calculation. Only the remaining tax after rebate is used for surcharge computation.

TermMeaningImpact
RebateReduces tax liability if income ≤ limit (u/s 87A)Tax saving for small/mid incomes
SurchargeAdditional tax on high incomesIncreases tax for high earners
Marginal ReliefProtects from sudden jump due to surchargePrevents over-taxation

Pro Tips

  • Claim 87A rebate automatically — ensure your portal regime selection (old/new) is correct before filing.
  • Cross ₹50L threshold? Use online calculator for marginal relief impact.
  • Prefer new regime if your income exceeds ₹2 crore — capped surcharge may reduce effective tax.
  • Always review Form 26AS/AIS — verify surcharge and rebate calculations match portal summary.

Quick Checklist Before Filing

1️⃣ Verify your total income after deductions.
2️⃣ Select correct tax regime (old/new) before filing.
3️⃣ Check if total income ≤ ₹5 lakh (old) or ≤ ₹12.75 lakh (new) → claim rebate.
4️⃣ Compute surcharge using official slabs.
5️⃣ Review marginal relief (auto-applied by utility).

Related Resources

Faq on Rebate under Section 87A & Surcharge is being read by professional on taxbizmantra website.

Pay Less, Stay Compliant – Your FAQs Guide to Rebate & Surcharge under Income Tax

Sources

Disclaimer: These FAQs on Rebate, Surcharge & Marginal Relief are based on the Income-tax Act, 1961 and the Finance Act, 2025. They are for general guidance only and not professional advice. For personalized assistance, refer to the official Income Tax Department website or a qualified Chartered Accountant.