Rebate under Section 87A of Income Tax Act,1961

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 Ac

CA Deepak Gupta

Apr 8, 2017

Last update on Apr 8, 2017

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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CA Deepak Gupta

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CA Deepak Gupta,is Co-founder of Studycafe. He is Microsoft Office Specialist and Corporate Trainer of AI Tools, Microsoft Excel. He is Finance Influencer having more than 250K followers on Social Media. CA Deepak Gupta, is Having more than 14 plus years of experience, and he has Worked with best brands Like, Hero, Wipro, Ericsson before Starting Studycafe. He has Trained more than 20000 Persons in Microsoft Excel, PowerPoint, Power BI, Google Sheet, Google Forms and Other Tools.