Rebate u/s 87A of the Income Tax Act was introduced in the year of 2013 with the objective of reducing the tax liability of the assessee whose income is not more than Rs 3,50,000
You can claim the rebate u/s 87A if you fulfil the following conditions:
- You are individual resident.
- Your Total Income less Deductions (under Section 80) is equal to or less than Rs 3.5 lakhs.
- The rebate is limited to Rs 2,500. This means that if the total tax payable is lower than Rs 2,500, then that amount will be the exempt no tax is payable. This rebate is applied to total tax before adding Education Cess (4%).
The rebate can be given to resident individuals whose income, after the process of deduction under Section 80, is within the specified limit of Rs 3,50,000.
The provision of rebate is not applicable to following: -
- Hindu Undivided Family
- firm or a company.
Features of rebate u/s 87A: -
The provision of rebate has following features:
- The provision of rebate is only applicable for Indian residents,
- Senior citizens i.e. people aged between 60 years and 80 years are considered eligible for rebate.
- The rebate is not applicable to super-senior citizens, whose age is above 80 years as they are already exempted from any of the provisions of income-tax.
- The rebate shall be applied to total tax before adding the Educational Cess of 4%.
- The total rebate provided to the individual would be Rs 2,500 or the total amount of tax liability (whichever is less).
Process of Making Calculation u/s 87A: -
Calculation of rebate under Section 87A shall be done in following manner:
Step 1: - Calculate the Net Gross Total Income, and reduce it under Section 80C and 80U.
Step 2: - Deduct the basic exemption limit from the Total Taxable Income derived.
Step 3: -Calculate the liability of tax based on Income Tax slabs.
Step 4: - Deduct the amount of permissible rebate.
Step 5: - For the balance payable amount calculate the sum of EC at the rate of 4%.
Amount of Deduction u/s 87A
The amount of deduction under this section shall either be 100% of the income-tax liability or Rs 2,500 (Whichever is lower).