The 87A cliff. ₹1 over = ₹60,000 tax.
Under both old and new regime, if your taxable income is at or below the Section 87A threshold, your tax is exactly ₹0. One rupee over — you lose the entire rebate. Drag the slider below to see exactly what crosses the cliff costs.
At ₹12,00,000 taxable income, your tax is ₹0. At ₹12,00,001 (one rupee higher), your gross tax liability jumps to ₹62,400 — a ₹62,400 cliff. Marginal relief softens the immediate impact but the full liability hits within ~₹50,000–75,000 above the cliff.
How the 87A cliff actually works
The rule (plain English)
Section 87A of the Income Tax Act gives you a tax rebate if your taxable income (after the standard deduction and any chapter VI-A deductions) is at or below a threshold. For FY 2026-27:
- New regime (default): taxable income ≤ ₹12 lakh ⇒ rebate up to ₹60,000 wipes out your tax to ₹0.
- Old regime: taxable income ≤ ₹5 lakh ⇒ rebate up to ₹12,500 wipes out your tax to ₹0.
Why a single rupee matters
The rebate is binary, not graduated. If your taxable income is ₹12,00,000 exactly under the new regime, your tax is ₹0. If it's ₹12,00,001 — the rebate vanishes, and you owe the full slab tax on every rupee above ₹4 lakh. That's a ~₹60,000 jump for one rupee of additional income.
Marginal relief — partial cushion
The Income Tax Act provides "marginal relief" above the cliff: your tax cannot exceed the amount of income you earned above the threshold. So at ₹12,00,001 you don't actually pay ₹60,000 — you pay ₹1 in tax (plus cess). The relief is removed gradually as income grows. The cliff feels real-world around ₹12,75,000 (new) or ₹5,15,000 (old) depending on slab geometry. The slider above shows you the point where you've fully crossed.
How to stay below the cliff
- New regime: max out the standard deduction (₹75,000 — auto-applied for salaried) and NPS employer contribution under 80CCD(2) (up to 14% of basic). Sometimes deferring variable pay (annual bonus, ESOP exercise) to the next FY is the cleanest move.
- Old regime: use 80C (₹1.5 lakh — PPF / ELSS / LIC / EPF), 80D (health insurance), 24(b) (home loan interest), HRA, and 80CCD(1B) (₹50K extra NPS).
- Both regimes: capital gains harvesting — book up to ₹1.25 lakh long-term equity gains exempt per FY by selling and immediately rebuying.
What changed in Budget 2025
The Union Budget (Feb 2025) raised the new-regime 87A threshold from ₹7 lakh to ₹12 lakh — the biggest shift to middle-class tax relief in years. The new-regime slabs were also rebuilt (no tax up to ₹4 lakh, 5% to ₹8 lakh, etc.). Old regime was unchanged. That's why the new cliff sits at ₹12 lakh now, not the older ₹7 lakh you may still see referenced.
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Methodology last verified 2026-04-01 · Union Budget 2025 (Feb 2025) · Source: Income Tax Department
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