Income Tax Rebate under section 87A

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Income Tax Rebate under section 87A

The taxes paid by Indian citizens play a crucial role in enhancing the country’s economy. India’s income tax system is progressive, meaning that tax rates increase with higher income levels. To manage this, the Income Tax Department has established different tax slab rates for individuals based on their total income. To prevent taxpayers with low taxable income from bearing an excessive tax burden, the government has introduced provisions such as the income tax rebate under Section 87A, which helps to reduce the tax liability for eligible taxpayers.

What is an Income Tax Rebate Under Section 87A?

The rebate under Section 87A of the Income Tax Act helps taxpayers reduce their tax liability. Resident individuals with a net taxable income of less than or equal to INR 5,00,000 can claim a tax rebate of up to INR 12,500 or the amount of tax payable, whichever is lower. This rebate is applicable under both the old and new tax regimes, ensuring that those with lower taxable incomes do not face a heavy tax burden.

What are the Eligibility Criteria to Claim a Rebate u/s 87A?

Rebate under Section 87A of the Income Tax Act

Individuals can claim a rebate under Section 87A of the Income Tax Act if they meet the following conditions:

1. Eligibility
   • Only resident individuals can claim this rebate.
   • The total taxable income after deductions under Chapter VI- A (if applicable) must not exceed INR 5,00,000 until AY 2023-24.
   • From AY 2024-25, the limit under the new tax regime has increased to INR 7,00,000.
   • The rebate applies to the total tax liability before adding health and education cess.
   • The rebate amount is the lower of the total tax payable or the specified limits for Section 87A.
   • Senior citizens and super senior citizens are also eligible to claim this rebate.
   • The rebate is available under both the old and new tax regimes.
   • Note: Rebate under Section 87A cannot be availed against income from long-term capital gains on equity shares or equity-oriented mutual funds (Section 112A).

How to Calculate Tax Rebate u/s 87A

1. Calculate Gross Total Income
   • Sum up the gross total income from all sources for the financial year.
2. Claim Deductions
   • Reduce the gross total income by claiming all eligible deductions under Chapter VI-A.
3. Determine Net Taxable Income
   • Arrive at the net taxable income after claiming the tax deductions.
4. Check Eligibility for Rebate
   • If the net taxable income is up to INR 5,00,000 under the old regime or INR 7,00,000 under the new regime (from AY 2024-25), the taxpayer is eligible for the rebate.
5. Calculate Rebate Amount
   • The maximum tax rebate available under Section 87A is INR 12,500 under the old regime and INR 25,000 under the new regime (from AY 2024-25).

Mr Kumar, aged 45 years, is a salaried resident and has opted for a new tax regime.

Particulars	Amount (in INR) (AY 2023- 24)	Amount (in INR) (AY 2024- 25)
Gross Total Income	6,00,000	6,00,000
Deductions	Not Applicable	Not Applicable
Net Taxable Income	6,00,000	6,00,000
Tax Payable before cess	22,500	15,000
Tax Rebate u/s 87A	Not Available (Since the taxable income is more than INR 5,00,000)	15,000 (Since the taxable income is up to INR 7,00,000)
Tax Payable after h.e.c at 4%	23,900	Nil

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Official Income Tax Return filing website: https://incometaxindia.gov.in/