Income Tax Rebate under Old and New Tax Regime for FY 2023-24:

Income Tax Rebate under Old and New Tax Regime for FY 2023-24 This article discusses an important benefit provided by the income tax, which is rebate u/s 87A of the income tax Act.

Rebate u/s 87A for FY 2023-24

With a view to providing tax relief to individual taxpayers who are in a lower tax bracket, a tax rebate is provided under Section 87A. Conditions for Rebate: This rebate is available if the following two conditions are satisfied -

• The taxpayer is a resident individual (he/she may be ordinarily resident or not ordinarily resident).
• His total income or net income or taxable income does not exceed Rs.5 Lakh in the Old Tax Regime or Rs.7 Lakh in the New Tax Regime.

Amount of Rebate: Under both the old and new income tax regimes, the amount of the rebate under Section 87A for FY 2021-22 and FY 2022-23 [(AY (2022-23) and AY (2023-24)] has remained the same. However, the rebate threshold was changed from the financial year 2023-24 & Onwards. From the financial year 2023-24 a resident individual with taxable income up to Rs. 5,00,000 is eligible for a tax rebate under the old tax regime, while a resident individual with taxable income up to Rs.7,00,000 is eligible under the new tax regime. Let's understand it elaborately: If a person has a total taxable income of up to Rs.7 lakh and chooses the new tax regime, the following rebate they will be eligible for:

• an amount of income tax payable on his total income or
• an amount up to Rs.25,000. (whichever is less)

A resident individual paying tax under the old tax regime (shifting out of the new tax regime) for the financial year 2023-24 with a total taxable income of less than Rs.5 lakh would receive a rebate equal to the lowest of the following:

• an amount equal to the amount of income tax payable on his total income or
• an amount of Rs.12,500. (whichever is less)

Rebate under Section 87A is not available in the case of a non-resident individual, resident or non-resident HUF/AOP/BOI or any taxpayer other than a resident individual. Marginal Relief under New Tax Regime - The rebate under section 87A is subject to marginal relief from the assessment year 2024-25. If net income exceeds Rs. 7,00,000 but does not exceed Rs. 7,27,770, income tax on such income cannot exceed the amount by which the net income exceeds Rs. 7,00,000. Example 1: Tax liability for the Financial year 2023-24 in the case of X (who is a resident individual) in the following situations: Situation 1 - Net Income: Rs.2,60,000 Situation 2 - Net Income: Rs.3,50,000 Situation 3 - Net Income: Rs.5,00,000 Situation 4 - Net Income: Rs.6,00,000 X does not want to opt-out from the alternative tax regime under section 115BAC.

Particulars	Situation 1	Situation 2	Situation 3	Situation 4
Net Income	2,60,000	3,50,000	5,00,000	6,00,000
Income tax on net income	500	5,000	12,500	32,500
Less: Rebate under section 87A	500	5,000	12,500	Nil
Balance	Nil	Nil	Nil	32,500
Add: Surcharge	Nil	Nil	Nil	Nil
Total	Nil	Nil	Nil	32,500
Add: Health and education cess @4%	Nil	Nil	Nil	1,300
Tax Liability	Nil	Nil	Nil	33,800

Example 2: Tax liability for the Financial year 2023-24 in the case of Y (who is a resident individual). His net income (computed under the alternative tax regime under section 115BAC (1A)) is as follows:- Situation 1 - Net Income: Rs.3,10,000 Situation 2 - Net Income: Rs.6,10,000 Situation 3 - Net Income: Rs.7,00,000 Situation 4 - Net Income: Rs.9,00,000 Y does not opt for the regular tax regime under section 115BAC(6).

Particulars	Situation 1	Situation 2	Situation 3	Situation 4
Net Income	3,10,000	6,10,000	7,00,000	9,00,000
Income tax on net income	500	16,000	25,000	45,000
Less: Rebate under section 87A	500	16,000	25,000	Nil
Balance	Nil	Nil	Nil	45,000
Add: Surcharge	Nil	Nil	Nil	Nil
Total	Nil	Nil	Nil	45,000
Add: Health and education cess @4%	Nil	Nil	Nil	1,800
Tax Liability	Nil	Nil	Nil	46,800

Rebate in New Tax Regime on the Income Tax Portal after 5th July 2024

On 5th July, the ITR online utility was updated, and after the update the utility stopped giving the benefit of Section 87A rebate for STCG u/s 111A and other special rate income. Before 5th July, IT Utility and Calculator were allowing 87A rebate against STCG u/s 111A and other special rate incomes other than Long Term Capital Gain (LTCG) u/s 112A where such rebate is specifically barred by Section 112A itself. Interpretation being followed by the Income Tax Portal It was provided that where the total income of the assessee is chargeable to tax under sub-section (1A) of section 115BAC, and the total income does not exceed Rs.700,000, the assessee shall be entitled to a rebate, of an amount equal to 100% of such income-tax or a Rs.25000, whichever is less. This would mean that in case the assessee has opted for the New Tax Regime, then the rebate shall be available for those income chargeable to tax u/s 115BAC. Income Chargeable under other sections like Short Term Capital Gain (STCG) u/s 111A, 115BBH etc. will not get the benefit of a Rebate.

Some Examples of Calculation of Rebate in New Tax Regime after 5th July 2024

Particulars	Situation 1	Situation 2	Situation 3	Situation 4
Salary After Standard Deduction	690,000.00	Nil	Nil	690,000.00
STCG u/s 111A	Nil	3,10,000	6,10,000	200,000.00
Net Income	690,000.00	3,10,000	6,10,000	890,000.00
Income tax on net income	24,000.00	500.00	16,000.00	54,000.00
Less: Rebate under section 87A	24,000.00	Nil	Nil	24,000.00
Balance	Nil	500.00	16,000.00	30,000.00
Add: Surcharge	Nil	Nil	Nil	Nil
Total	Nil	500.00	16,000.00	30,000.00
Add: Health and education cess @4%	Nil	20.00	640.00	1,200.00
Tax Liability	Nil	520.00	16,640.00	31,200.00

Please note that the Special Rate income has not been considered while calculating rebate u/s 87A, as per the changes made in the Income Tax Utility on 05/07/2024.