Income Tax Rebate under Section 87A is allowed as per the following schedule for different Financial Years
|Financial Year||Amount of Rebate||Applicable only if Income is less than|
|2018-19||Rs. 2,500||Rs. 3.5 Lakhs|
|2019-20||Rs. 12,500||Rs. 5 Lakhs|
Section 87A provides for Income Tax Rebate to Individuals earning Income below the specified limit. This Rebate would be given from the Total Tax payable by an Individual. It is pertinent to note here that this rebate is to be subtracted from the Total Tax Payable and not from the Total Income of an Individual. (Recommended Read: Difference between Income Tax Deduction vs Rebate vs Relief)
Section 87A: Income Tax Rebate – For Financial Year 2018-19
As Section 87A provides for Income Tax Rebate, the taxpayer will first compute the Total Tax Payable and then reduce Rs. 2,500 from this Tax payable provided his Total Income is less than Rs. 3.5 Lakhs. If his Total Income is more than Rs. 3.5 Lakhs, the taxpayer won’t be able to claim income tax rebate under Section 87A.
Budget 2019 Update: The Limit of Rs. 3.5 Lakhs has now been increased to Rs. 5 Lakhs and the Rebate of Rs. 2,500 has been increased to Rs. 12,500. The increased limits would be applicable from Financial Year 2019-20 onwards. The manner of claiming rebate would remain the same as explained below and only the rebate would increased from Rs. 2500 to Rs. 12500 and the income eligibility criteria from Rs. 3.5 Lakhs to Rs. 5 Lakhs.
- The Net Taxable Income of Rs. 3.5 Lakh is the sum total of incomes under all heads i.e. Salary, House Property, Business or Profession, Capital Gains and Other Sources.
- In case there is any loss under any head due to payment of housing loan or for any other reason, such loss would also be reduced from the total income.
- Deductions from Section 80C to Section 80U under Chapter VI-A would also be allowed and the resultant figure i.e. Total Income should be less than Rs. 3.5 Lakh for an individual to claim income tax rebate of Rs. 2,500 under Section 87A.
The above points have been represented below showing the manner of computation:-
Salient Features of Income Tax Rebate under Section 87A
The following are the salient features of Income Tax Rebate under Section 87A:-
- Rebate under Section 87A is only available to Individuals. All categories of Individuals whether Male or Female or Senior Citizens are eligible to claim Income Tax Rebate under Section 87A. Other types of assesses like HUF, Companies, Partnership Firms, LLP etc are not eligible to claim Income Tax Rebate under Section 87A.
- Income Tax Rebate under Section 87A is only available to Resident Individuals and not to Non-Resident Individuals. (Recommended Read: How to compute Residential Status)
- The total rebate allowed under section 87A would be Rs. 2,500 or the total tax payable (whichever is less)
- Income Tax Rebate of Rs. 2,500 is allowed before the levy of Education Cess and SHEC. In other words, Education Cess and SHEC would be levied on the tax payable after allowing for Income Tax Rebate of Rs. 2,500
- There is no benefit of this Rebate to Super-Senior Citizens i.e. Individuals above 80 years of age as their Income up to Rs 5 Lakh is already exempted from the levy of Income Tax.