Understanding Rebate Under Section 87 A

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:

• Input your gross total income for a specific financial year
• Input details of tax deductible expenses and investments under key sections like Section 80C, Section 80 CCD, Section 80 D, etc.
• Ensure other Chapter VI deductions and exemptions like House Rent Allowance (HRA), Gratuity payouts, etc. are updated in the ITR
• Confirm that the system calculation of net taxable income is correct
• 100% tax rebate under section 87A up to Rs. 12,500 will be automatically applied if the total income does not exceed Rs. 5 Lakh

This will reduce your income tax liability for the applicable financial year.

The eligibility criteria to claim rebate under section 87A is as follows:

• You must be a resident Indian
• Your net taxable income after taking deductions as per Section 80D, 80C etc. into account does not exceed Rs. 5 lakh in a particular financial year
• 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.
• It is important to note that the rebate will be applicable to the tax payable prior to the addition of health and education cess.

Here are some points that must be kept in mind to avail rebate u/s 87A:

• The rebate can be applied to the tax in total prior to the addition of a health and education cess of 4 per cent
• Only the resident individuals are legible to avail rebate as per this section
• Senior citizens above the age of 60 years and below the age of 80 can avail rebate u/s 87A
• ISuper senior citizens above the age of 80 years do not hold eligibility to claim rebates u/s 87A
• The rebate amount will also be lower than the specified limit under Section 87A or the total taxable income prior to tax.
• Additionally, Section 87A is available under the old and the new tax regime.

Using an income tax calculator, you can easily determine your eligibility to avail the tax rebate under Section 87A.