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 12500 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:

Bare Act:

Rebate of income-tax in case of certain individuals.

87A. An assessee, being an individual resident in India, whose total income does not exceed [1][three hundred fifty thousand] rupees, shall be entitled to a deduction, from the amount of income-tax (as computed before allowing the deductions under this Chapter) on his total income with which he is chargeable for any assessment year, of an amount equal to hundred per cent of such income-tax or an amount of [2][two thousand and five hundred] rupees, whichever is less.

[1] Words “five hundred thousand” shall be sub. for “three hundred fifty thousand” by the Act No. 7 of 2019, w.e.f. 1-4-2020.

[2] Words “twelve thousand and five hundred” shall be sub. for “two thousand and five hundred” by the Act No. 7 of 2019, w.e.f. 1-4-2020.

Conclusions

Tax rebate of Rs 12500 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.

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

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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