Rebate u/s 87A | Income Tax Rebate Under Section 87A
Rebate u/s 87A - reduces the liability of income taxpayers.
A rebate u/s 87 can be claimed, if your concerned total income does not exceed Rs 5 lakh in a specific financial year, after the chapter VIA deductions. Moreover, after claiming rebate u/s 87A, your tax liability will become nil.
The tax rebate u/s 87A has been introduced by the government in the year 2013-14, with the sole purpose to provide benefits on payable taxes. As mentioned above, rebate u/s 87A is only applicable or can only be claimed if your annual income meets the specified criteria, thus, even if your income exceeds Rs one, that is Rs 5,00,001, you won’t be eligible for rebate u/s 87A.
And in the case of the concerned case, normal tax rates will be applicable.
Since, under the financial year 2020 - 2021, the amount of tax rebate is unchanged under both, the old tax regime and the new tax regime. Thus, if you are eligible and have taxable income, i.e., Rs 5,00,000, you are eligible to receive a tax rebate of Rs 12,500 or equal to the amount of payable tax, which would be lower.
With the basic knowledge of what is rebate u/s 87A, let’s move on to how much rebate u/s 87A is allowed.
How Much Rebate U/S 87A is Allowed?
Below mentioned is the amount of rebate u/s 87A is allowed on the amount of up to Rs 5 lakh -
- Rs 12,500
- The amount of tax payable
Among mentioned amounts to be paid on rebate, you are required to pay which amount would be lower.
Now, let’s move forward to understand what is the total taxable income for claiming rebate u/s 87A.
What is the Total Taxable Income For Claiming Rebate U/S 87A?
As per rebate u/s 87A, the total taxable income for claiming the rebate is mentioned below -
- Gross taxable income
- Less: reducing u/s 80C to 80U
This can be better understood through an example mentioned below -
Say, Mr. ABC is an Indian resident of 28 years old, whose income is as mentioned in the table -
| Gross total income | Rs 5,75,000 |
|---|---|
| Investment to u/s 80C | Rs 1,50,000 |
| The medical policy has taken u/s 80D | Rs 25,500 |
Depending on the provided information, the total taxable income of Mr. ABC would be as followed -
| Total income | Rs 5,75,000 |
|---|---|
| Less : Investment to u/s 80C | Rs 1,50,000 |
| Less : Medical policy taken u/s 80D | Rs 25,500 |
| Total taxable income (TTI) | Rs 4,00,000 |
From the given data, it is clear that the total taxable income (TTI) of Mr. ABC is Rs 4,00,000, thus he can claim rebate u/s 87A.
For a better understanding of how we have calculated the rebate u/s 87A, consider following the below-mentioned steps -
How to Calculate Rebate U/S 87A?
- Calculate your total gross income.
- Minus the deduction under 80C to 80D.
- As per income tax slabs, tax payable will be calculated.
- Reduce the amount of allowed rebates.
- Lastly, calculate the amount of Health and Education Cess payable @ 4%.
Since, it is clear how you can calculate the payable tax, let’s move on to, the steps involved in how to claim a tax rebate under 87A.
What Are the Steps to Claim a Tax Rebate Under Section 87A | How to Claim a Rebate U/S 87A?
- Calculate the gross total income.
- Deduct tax deductions for tax savings, investments, and more.
- The total income will be obtained after tax deductions.
- In ITR declare your total income.
- If income does not exceed Rs 5 lakh, claim rebate u/s 87A.
- The highest rebate to be claimed under rebate u/s 87A is Rs 12,500.
Since you are aware of how to calculate rebate u/s 87A and the steps to claim a tax rebate under Section 87A, let’s know what are the things you are required to keep in mind while filing for a rebate under section 87A.
What Are the Things to Remember to Avail Rebate Under Section 87A?
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- The rebate is applicable on gross total income prior to adding a health and education cess.
- Only Indian residents can claim rebate u/s 87A.
- A senior citizen over 60 years and below 80 years can claim a rebate under section 87A.
- A senior citizen over 80 clear is not eligible to claim a rebate under Section 87A.
- The rebate amount will be less than the limit specified under Section 87A or total income tax, prior to the addition of the health and education cess.
- The rebate u/s 87A is available under the old tax regime and the new tax regime, both.
Under What Liabilities a Tax Rebate U/S 87A is Claimed?
- Normal income, taxed at slab rate.
- Short-term equity gains or listed equity shares and mutual funds equity-oriented schemes under Section 111A of income tax, at which 15% of the taxable income is payable.
- For long-term equity gains, under Section 112 of the income tax, under this, a tax rebate is claimed on the sale of capital assets, excluding listed equity shares and mutual funds equity-oriented schemes.
Conclusion
Understanding what is rebate u/s 87A, how to calculate rebate u/s 87A total income, how to claim rebate under Section 87A and other questions. To be honest it is not rocket science such as understand how to apply/ get a BIS certificate, considering that it involves a definite series of steps, which are mandatory to follow.
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