Thinking about the well-being of its citizens is the primary goal of any nation’s government. To achieve that, any government would need monetary support and for the same reason, it collects tax from eligible citizens. Section 87A of the Income Tax Act, 1961 is one of the income tax provisions that help taxpayers save on the payable income tax. Anyone who is updated about the budget would surely have come across the term rebate or rebate under Section 87A. If not, you will get all the necessary information down this page.
The income tax rebate under Section 87a provides some relief to the taxpayers who fall under the tax category of 10%. Any individual whose annual net income does not exceed Rs.5 Lakh qualifies to claim tax rebate under Section 87a of the Income Tax Act, 1961. This implies an individual can get a rebate on the tax of up to Rs.2,000. In this way, the deduction will be either Rs.2000 or 100% of the salary of an individual, whichever is smaller.
One more noteworthy point of section 87A of income tax is it is offered only to individuals and not the people of Hindu Undivided Families, BOI/ AOP, Company, or any firm. Moreover, the total rebate amount should not exceed the amount of the income tax calculated before the deduction on the total income of the person with which he/she will be charged for the assessment year.
Here are some of the points that highlight the eligibility criteria for availing of the 87A tax rebate:
Income Slab (in Rs) | Tax payable before cess (in Rs) | Rebate u/s 87A (in Rs) | Tax Payable + 4% Cess (in Rs) |
2,70,000 | 1000 | 1000 | 0 |
3,60,000 | 3000 | 3000 | 0 |
4,90,000 | 12000 | 12000 | 0 |
12,00,000 | 1,72,500 | 0 | 1,79,400 |
Note – The rebate that can be claimed in the financial years stated above is limited to Rs. 2,500. This means that if the total payable tax is below Rs 2,500, that amount will be the respective rebate under section 87A.
Let’s understand this in a better way by considering the details in the following tabulated format:
Taxable income | Income Tax | Applicable Rebate under Section 87A | Total Tax Payable |
Rs. 3 lakhs | Rs. 2,500 | Rs. 2,500 | Nil |
Rs. 3.1 lakhs | Rs. 3,000 | Rs. 2,500 | Rs. 500 |
Rs. 3.2 lakhs | Rs. 3,500 | Rs. 2,500 | Rs. 1,000 |
Rs. 3.3 lakhs | Rs. 4,000 | Rs. 2,500 | Rs. 1,500 |
Rs. 3.4 lakhs | Rs. 4,500 | Rs. 2,500 | Rs. 2,000 |
Rs. 3.5 lakhs | Rs. 5,000 | Rs. 2,500 | Rs. 2,500 |
Rs. 3.6 lakhs | Rs. 5,500 | Nil | Rs. 5,500 |
Rs. 3.7 lakhs | Rs. 6,000 | Nil | Rs. 6,000 |
Rs. 3.8 lakhs | Rs. 6,500 | Nil | Rs. 6,500 |
For FY 2016-17
In FY 2016-17, the eligibility of an individual to claim a rebate us Section 87A was based on the following conditions:
To understand this better let’s consider the following example:
Taxable income | Income Tax | Applicable Rebate Under Section 87A | Payable Tax |
Rs. 3 lakhs | Rs. 2,500 | Rs. 2,500 | Nil |
Rs. 3.5 lakhs | Rs. 5,000 | Rs. 5,000 | Nil |
Rs. 4 lakhs | Rs. 7,500 | Rs. 5,000 | Rs. 2,500 |
Rs. 4.5 lakhs | Rs.10,000 | Rs. 5,000 | Rs. 5,000 |
Rebate u/s 87A was introduced with a motive to provide relief to the taxpayers who fall in the lowest tax bracket. The implementation of this section armed the government by providing direct benefits to the respective section without a reduction in the overall tax rates. The frequently changing limits of 87A are evidence of the same.
No, NRIs cannot claim a rebate under this section as this is only allowed for resident individuals. Taxpayers qualified as non-residents are not permitted to claim a rebate under Section 87A.
You can calculate the rebate u/s 87A by checking off the following things:
On the remaining balance tax payable (if any), calculate the amount of Health and Education Cess payable at 4%.
In case you have already paid the taxes and qualify for tax rebate under Section 87A, you can claim for a refund while filing your tax return.
Yes, income tax rebate u/s 87A is applicable to the taxable income which also includes agricultural income.
Yes. Senior citizens can claim rebate u/s 87A.