Rebate under Section 87A of Income Tax Act: Section 87A


Rebate under Section 87A of Income Tax Act,1961 | Section 87a | Relief us 87a

Section 87a of the Income Tax Act was introduced in Finance Act, 2013. The section was introduced to provide benefits to individuals whose total net income is below Rs.5,00,000 (Rs. 3,50,000 from F.Y 2017-18)

Tax rebate of Rs 12,500 for individuals with taxable income of up to Rs 5 Lakh is allowed in FY 2019-20-18 / AY 2020-21.

Income Tax Rebate under Section 87A:

Tax rebate of Rs 12,500 for individuals with taxable income of up to Rs 5 Lakh is allowed in FY 2019-20-18 / AY 2020-21.

  • Only Individual Assesses earning net taxable income up to Rs 5 lakhs are eligible to enjoy tax rebate u/s 87A.
  • For Example : Suppose your yearly pay comes to Rs 6,50,000 and you claim Rs 1,50,000 u/s 80C. The total net income in your case comes to Rs 5,00,000 which makes you eligible to claim tax rebate of Rs 12,500.
  • The amount of tax rebate u/s 87A is restricted to maximum of Rs 12,500. In case the computed tax payable is less than Rs 12,500, say Rs 10,000 the tax rebate shall be limited to that lower amount i.e. Rs 10,000 only.
  • The Tax Assesse is first required to add all incomes i.e. salary, house income, capital gains, business or profession income and income from other sources and then deduct the eligible tax deduction amounts u/s 80C to 80U and under section 24(b) (Home Loan Interest) to come up with the net taxable income.
  • If the above net taxable income happens to be less than Rs 5 lakhs then the tax rebate of Rs 12,500 comes in to the picture and should be deducted from the calculated total income tax payable.
S. No. Financial Year Rebate
1 2019-20 12,500/-
1 2018-19 2,500/-
1 2017-18 2,500/-
2 2016-17 5000/-
3 2015-16 2000/-
4 2014-15 2000/-
5 2013-14 2000/-

Few Examples to understand rebate u/s 87A on Income Tax:

 

Total Income Tax payable before cess Rebate u/s 87A (max allowable) Tax Payable + education cess
2,70,000 1,000 1,000 0
3,00,000 2,500 2,500 0
3,25,000 3,750 3,750 0
3,50,000 5,000 5,000 0
5,00,000 12,500 12,500 0
5,50,000 5,000 22,500 22,500

Key Points of Section 87A of the Income Tax Act, 1961:
Listed below are the key points of Section 87A of the Income Tax Act, 1961.

  • Amended section 87A is applicable from 1st April of that financial year, it is applicable to the assessment year and its subsequent assessment years
  • Maximum Rebate amount Rs. 12500
  • Only Indian residents can avail the rebate, NRIs are not eligible for the rebate
  • Both male and female assesses are eligible for the rebate
  • Rebate benefit is not available to super senior citizens
  • This rebate is deducted from total tax before adding Education Cess(4%).

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2 Comments

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  1. Dear friends. we can thank for the rebate of sec.87-a, given by the Govt, but how can we show in the form 16 or first ofall in the Quarterly return of 24Q to be filed before 31.05.2018. As the people who are filing the return are not so familiar with this, they asked my friend to reduced the taxable income to the tune of 20000/-. He did it and filed the same. He got an intimation from the TDS dept, stating interest has to be paid for the short deduction of tds. He is going to remit the interest? where should I show the Rs.2000/- in form 24Q annextures and also in form 16?