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. 

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 than 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. 

Eligibility Criteria

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

  • 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 Rs. 5,00,000 for the FY 2019-2020.
  • 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.
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

Section 87A Eligibility Criteria for FY 2017-18 and FY 2018-19

  • 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: 

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:

  • The individual must be an Indian resident.
  • The individual’s total income, less deductions under Section 80, should be less than or equal to Rs. 5,00,000.
  • The rebate that could be claimed was capped at Rs. 5,000. This implied that if the total tax payable was below Rs. 5,000, that amount would be the rebate under section 87A.

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 benefit to the respective section without a reduction in the overall tax rates. The frequently changing limits of 87A are evidence of the same. 

Section 87A of income tax – Frequently Asked Questions 

Que. Can NRIs claim a rebate under section 87A?

Ans. 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. 

Que. How to calculate rebate u/s 87A?

Ans. You can calculate the rebate u/s 87A by checking off the following things:

  • Firstly, calculate the Gross Total Income(GTI)
  • Reduce the deductions under the sections 80C to 80U
  • Calculate your Tax Payable as per the respective Income Tax slabs
  • Deduct the amount of rebate allowed

On the remaining balance tax payable (if any), calculate the amount of Health and Education Cess payable at 4%. 

Que. What if I have already paid my taxes and want a tax rebate under section 87A?

Ans. 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. 

Que. Is 87A rebate available on agricultural income?

Ans. Yes, income tax rebate u/s 87A is applicable to the taxable income which also includes agricultural income.