Section 87A – How is income up to seven lakhs tax-free?

As per the Budget 2023, under Sec.87A, how is income up to seven lakhs tax-free from 1st April 2023? This is the biggest relief for those who are looking for some tax relief. Hence, let us discuss on this aspect in detail.

All about Sec.87A of the Income Tax Act

You have to first understand Sec.87A to know how is the income up to seven lakhs tax-free.

The conditions to avail the tax benefit under Sec.87A are as below.

# You must be a RESIDENT INDIVIDUAL (he may be ordinarily resident or not ordinarily president).

# Your Total Income, after Deductions, (like under Section 80C to 80U) is equal to or less than Rs.5,00,000 (for the old tax regime). But for the new tax regime, it is now enhanced to Rs.7,00,000.

If the above two conditions are satisfied, then the resident individual can claim a rebate under Sec.87A as below.

  • 100% of income tax or Rs.12,500, whichever is less (for old tax regime)
  • 100% of income tax or Rs.25,000, whichever is less (for new tax regime)

In a Budget 2023 speech, it is clearly mentioned as below.

The first one concern rebate. Currently, those with income up to Rs.5 lakh do not pay any income tax in both old and new tax regimes. I propose to increase the rebate limit to Rs.7 lakh in the new tax regime. Thus, persons in the new tax regime, with income up to Rs.7 lakh will not have to pay any tax.

It is clearly mentioned that the Rs.7 lakh enhancement is ONLY FOR NEW TAX REGIME. However, there is no alternation for this section if you are under old tax regime.

Hence, let me share the example of the old tax regime first.

Tax Rebate under Sec.87A for old tax regime - Budget 2023

Now, let us take an example of the new tax regime and try to understand how is income up to seven lakhs tax-free.

Budget 2023 Income up to seven lakhs tax-free

I hope it is now clear to all of you in understanding under Sec.87A, how is income up to seven lakhs tax-free. You can refer the latest posts on Budget 2023 –

20 Responses

  1. Sir, 1) For A.Y 2023-24, is 80TTB deduction of rs 50k still available in new tax regime for senior citizens.
    2) Is 80TTA available for new tax regime

  2. Hello sir,
    For old tax regime, if total income is 7lakhs, then tax is 52,500. But, in the table given, it is showing tax payable is 45,000. How. There is no rebate under sec 87A.

  3. My friend took a job of 7.32 Lpa just last month. What is the tax he is going to pay (if the job is his only income and he didn’t do any investment, insurance etc.)? I am asking as per the new tax regime.

    1. Dear Badal,
      Tax will not be on gross income but on net income (which is unknown to me). Hence, let your friend first arrive at net taxable income. If he can’t do on his own, then let him approach a tax consultant. It is hard for me to calculate and give an answer for each and every individual.

    1. Dear Siddaraju,
      Do your homework or consult a CA. It is hard for me to judge and calculate for each and every person and that also without knowing much about your financial life.

  4. 1) If Gross income is 10 lakhs, what are the standard deductions in new tax regime
    2) Whether 80C applicable in new tax regime

  5. 1) Is deduction u/s 80 U which is available in old tax regime, also available in new tax regime?
    2) Standard deduction of 50,000/- for salaried person, which is available in old tax regime, also available in new tax regime, for tax fillers earning 9 lakh per annum?

  6. Hi Sir, My mother is Family pensioner aged 64 and she will earn Rs4.8lakhs from April 2022 to March 2023. Pls tell me weather my mother have to file ITR or Not???. This Fy2022 – 2023 only she is earniing after my father death

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