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 an 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 exempt no tax is payable. This rebate is applied to total tax before adding Education Cess (4%).
Applicability u/s 87A rebate: -
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.
Non-Applicability u/s 87A rebate: -
The provision of the rebate is not applicable to the following: -
- Hindu Undivided Family
- NRI
- AOP/BOI
- firm or a company.
Features of rebate u/s 87A: -
The provision of rebate has the following features:
- The provision of the rebate is only applicable for Indian residents,
- Senior citizens i.e. people aged between 60 years and 80 years are considered eligible for rebates.
- The rebate is not applicable to super-senior citizens, whose age is above 80 years as they are already exempted from income tax provisions.
- 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 the 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).
Income Update
- Income tax Section 87A allows an individual to claim income tax rebate provided their taxable income does not increase the specified level. This income tax rebate effectively makes zero tax outgo of an individual.
- Union Budget for FY 2023-24, Income Tax Rebate u/s 87A limit was increased from INR 5 lakh to INR 7 lakh under new tax regime (applicable from Financial Year 2023-24). This Tax Rebate u/s 87A limit is still INR 5 lakh in old regime. This means that under Income Tax - old in The income Tax regime, if your income tax is under INR 12,500, you don’t have to pay any tax and under new regime, if your income tax is INR 25,000, you don’t have to pay any tax, and that is the meaning of this Tax Rebate under Section 87A.
