Section 87A

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 on this page. 

Income Tax Rebate 87A

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. 

Steps to Claim Tax Rebate Under Section 87A

Here is a step-by-step procedure you need to follow to claim rebate under section 87A:

1. Calculate the gross total income for the year.
2. Reduce the tax deductions for tax savings, investments, and much more.
3. Get to your total income after the reduction in tax.
4. Declare your gross income and the tax deductions in ITR.
5. Claim tax rebate under Section 87A (only when the income does not exceed 5 lakhs).
6. The maximum rebate under section 87A for AY 2024-25 (FY 2023-24) is ₹25,000 under the new tax regime and ₹12,500 under the optional tax regime.  This rebate is applicable under section 87A of the Income Tax Act.

Eligibility Criteria for Claiming Tax Rebate Under Section 87A

Here are some of the points that highlight the eligibility criteria for availing of the tax rebate under Section 87A:

• The rebate is meant only for individual taxpayers. If you belong to a HUF or you want it for your firm or company, this rebate cannot be availed.
• There are no gender-based restrictions for this section, i.e. men and women can both avail the benefits.
• The net taxable income of an individual should not be more than ₹5,00,000 for the FY 2023- 2024.
• As per the laws, a maximum rebate of INR 12,500 can be availed under this section. To put it in a nutshell, if the taxes that you are liable to pay are INR 12,500 or less, this rebate can be availed by you.

Section 87A Eligibility Criteria for FY 2023-24 and FY 2024-25

• An individual can claim a tax rebate us 87A provided he or she meets the following conditions:
• The individual must be an Indian resident.
• The total income, deductions under Section 80, has to be less than or equal to Rs. 3,50,000.

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: 

Rebate u/s 87A was introduced with the motive of providing 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. 

Considerations Before Rebate Under Section 87A

The following are some crucial points you must consider before availing rebate under Section 87A:

• Rebate can be applied to the total tax before adding health and education cess.
• Only Indian residents can avail of rebates under this section.
• Senior citizens can also avail of rebates under the section.
• Super citizens who are above the age of 80 are not eligible.
• The amount of rebate is lower than the limit specified under Section 87A.
• This section is available under the old and the new regime.

Claiming a rebate under Section 87A provides significant tax relief to eligible individuals with an annual income up to ₹5 lakhs. Section 87 A's rebate is a valuable provision aimed at reducing tax burdens for resident individuals, including senior citizens aged 60 to 79 years.

This provision promotes tax compliance and economic well-being by lowering the tax liability of eligible taxpayers, fostering a more equitable and inclusive tax system.