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Income Tax Rebate Under Section 87A

Income Tax Rebate under section 87A

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A rebate under section 87A is one of the income tax provisions that help taxpayers reduce their income tax liability. Taxpayers earning an income below a certain limit have the benefit of paying marginally lower taxes.

Let’s understand the rebate available under section 87A in detail:

Budget-2019-middle-class

1. Eligibility to claim rebate u/s 87A FY 2019-20 (AY 2020-21)

You can claim the benefit of rebate under section 87A for FY 2020-21 only if the following conditions are satisfied:

  1. You are a resident individual
  2. Your total income after reducing the deductions under chapter VI-A (Section 80C, 80D and so on) does not exceed Rs 5 lakh in an FY
The tax rebate is limited to Rs 12,500. This means, if your total tax payable is less than Rs 12,500, then you will not have to pay any tax.

Do note that the rebate will be applied to the total tax before adding the health and education cess of 4%.

Here are a few examples of section 87A rebates for resident individuals including senior citizens:

 
Total Income (Rs) Tax payable before cess (Rs) Rebate u/s 87A (Rs) Tax Payable + 4% Cess (Rs)
2,70,000 1,000 1,000 0
3,60,000 3,000 3,000 0
4,90,000 12,000 12,000 0
12,00,000 1,72,500 0 1,79,400

2. Eligibility to claim rebate u/s 87A FY 2018-19 and FY 2017-18

If you are filing income tax returns for FY 2017-18 or FY 2018-19, the eligibility criteria to claim tax rebate under section 87A are as follows:

  1. You are a resident individual
  2. Your total income after deductions under chapter VI-A (Section 80C, 80D, 80E and so on) is less than Rs 3.5 lakh
  3. The amount of tax rebate is limited to Rs 2,500. So, if your total tax payable does not exceed Rs 2,500, then you will not have to pay any tax.

    Do note that the tax rebate will be applied to the total tax before adding the health and education cess of 4% (FY 2018-19) or education cess of 3% (FY 2017-18).

Here are a few examples of section 87A rebates for resident individuals including senior citizens for FY 2018-19:

Total Income (Rs) Tax payable before cess (Rs) Rebate u/s 87A (Rs) Tax Payable + 4% Cess (Rs)
2,65,000 750 750 0
2,70,000 1,000 1,000 0
3,00,000 2,500 2,500 0
3,50,000 5,000 2,500 2,500+100=2600
Here are a few examples of section 87A rebates for resident individuals including senior citizens for FY 2017-18:

 
Total Income (Rs) Tax payable before cess (Rs) Rebate u/s 87A (Rs) Tax Payable + 3% Cess (Rs)
2,65,000 750 750 0
2,70,000 1,000 1,000 0
3,00,000 2,500 2,500 0
3,50,000 5,000 2,500 2,500+75= 2,575
 

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4. Frequently Asked Questions

 
  • Can NRIs claim rebate under section 87A?
    No, this rebate is only allowed for resident individuals. Therefore, taxpayers qualifying as non-residents are not eligible for a rebate under 87A.
  • Can this rebate be claimed by anyone?
    This rebate is only allowed to individuals. HUFs or firms or companies cannot claim this rebate.
  • How can I claim section 87A rebate in ClearTax Software?
    ClearTax e-filing software automatically gives the rebate while e-filing, if you are eligible.