Income Tax Rebate Under Section 87A: Reducing Tax Burden for Low-Income Earners

Purpose of Section 87A Section 87A provides tax relief for residents with lower incomes, ensuring they do not bear a heavy tax burden. Eligibility Criteria Only resident individuals can claim this rebate. For AY 2023-24, taxable income after deductions must not exceed INR 5,00,000. From AY 2024-25, under the new tax regime, the limit is increased to INR 7,00,000. Senior citizens and super senior citizens are eligible. Not applicable to long-term capital gains on equity shares or mutual funds under Section 112A.

Rebate Amount The maximum rebate is INR 12,500 or the total tax payable, whichever is lower, for AY 2023-24. For AY 2024-25, under the new regime, it is INR 25,000. Application Under Both Tax Regimes The rebate applies under both the old and new tax regimes, providing flexibility to taxpayers.

Steps to Calculate Tax Rebate Calculate Gross Total Income: Sum up income from all sources. Claim Deductions: Deduct eligible amounts under Chapter VI-A. Determine Net Taxable Income: After deductions. Check Eligibility: Ensure net taxable income is within the limits. Calculate Rebate: Apply the rebate to the lower of the tax payable or the specified rebate limit.

Benefits of Section 87A Significant tax relief for low-income earners. Encourages compliance by making tax payments more manageable. Ensures equitable tax distribution by reducing the burden on lower income brackets.