Income tax rules in India are based on a progressive tax system, so tax payers with higher income pay more tax based on the applicable income tax slab rate, while those with lower income have a lower income tax liability. One way in which current income tax regimes ensure this is through benefits like the income tax rebate under Section 87A of the Income Tax Act, 1961. However, not every tax payer qualifies for the Section 87A tax rebate. Read on to know what the limit of rebate under Section 87A is, who qualifies for this income tax rebate and how to claim it....Read More
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The Government of India has not changed the basic exemption limit of Rs. 2.5 lakhs for quite a few years now. So, anyone with income exceeding this limit is liable to pay income tax. However, at the very same time, successive governments have proposed tax rebates for taxpayers up to a specific income limit. One of these is Section 87A rebate that was introduced in FY 2013-14. The current amended Section 87A with revised limits came into effect in FY 2020-21.
As per current income tax slab rates, a resident Indian with individual total income of Rs. 5 lakh or lower in a financial year can claim rebate under section 87A. The maximum rebate under Section 87A will be 100% up to Rs. 12,500 in a financial year.
So, if your tax liability is Rs. 2,500, the rebate amount will be Rs. 2,500 only. While if your tax liability for the fiscal is Rs. 10,000, Section 87A rebate will be Rs. 10,000. However, no 87A rebate will be available if your total income for the fiscal is higher than Rs. 5 lakh.
For the current financial year 2022-2023 (AY 2023-2024), if your total taxable income for the fiscal is Rs. 5 lakh or less, then you can avail the rebate benefits under section 87A.
You do not need to claim rebate under section 87 A separately if you are filing your income tax return online. As long as the computed net taxable income as per your ITR is lower than Rs. 5 lakh, Section 87A rebate will be applied automatically and reduce your income tax liability for the applicable financial year. Below are the key steps for filing your ITR:
This will reduce your income tax liability for the applicable financial year.
The eligibility criteria to claim rebate under section 87A is as follows:
The maximum tax rebate under Section 87A for a financial year is 100% up to Rs. 12,500. If your tax liability exceeds Rs. 12,500 for the FY, the Section 87A income tax rebate will not be applicable.
Here are some points that must be kept in mind to avail rebate u/s 87A:
Using an income tax calculator, you can easily determine your eligibility to avail the tax rebate under Section 87A.
Yes. The resident individuals earning from agricultural income sources are eligible to claim tax rebate under section 87A.
Yes. Senior citizens aged 60 years and up to 80 years as well as super senior citizens olders than 80 years are eligible for a tax rebate under section 87A.
No. Tax rebate under section 87A is only applicable for resident individuals. Therefore, the taxpayers who qualify as non-resident individuals are not eligible for tax rebate u/s 87A.
The tax rebate under section 87A is only applicable to individuals. It does not hold applicability for firms, companies, or HUFs.
Section 87A provides a tax rebate to individual taxpayers if the total income is below INR 5 lakhs after the deduction of claims. In order to calculate this rebate, determine the taxable income post deductions to check the rebate eligibility. Calculate the total income and reduce it as per the deductions under Section 80C to 80U. If the same is below INR 5 lakh, then you are eligible for the tax rebate payment i.e., complete tax amounts up to INR 12,500 will be deducted according to section 87A.
An individual claiming tax rebate under section 87A will not attract a levy of any surcharge.
ARN NO: Aug23/Bg/4P
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