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Section 87 A of Income Tax Act

Section 87 A of Income Tax Act (Helpful Guide)

The Finance Act, 2019 gave relief to the taxpayers whose annual income was not more than INR 5 lakhs. This effort was to strengthen the economically weaker section of the earning group. Any taxpayer can now claim a deduction of up to INR 12,500 or the tax payable amount whichever is less. This change came into effect on April 1st of 2019. Section 87 A of Income Tax Act is used by all the eligible taxpayers to claim tax deductions.

What is Rebate?

Rebate is a form of refund, which the taxpayer receives from the government when he has paid more tax than their liability.

Now, let’s see how section 87 A helps the taxpayer’s to get their money back in such cases.

What is 87A of Income Tax Act?

Any assessee whose annual income is less than INR 5 lakh is eligible to get INR 12,500 or the amount of tax payable, whichever is less among the two as rebate under section 87 A of Income Tax Act. 

While calculating the rebate, it’s important to note that the health and education cess is added after the calculation of tax liability of the taxpayers for a financial year. It is 4% at present.

 As people sometimes pay more taxes because of the less information. They can always claim rebates while filing the ITR for a financial year and get the refunds.

The rebate under section 87 A is available to the lower earning class of the society. The IT Department has revised this section from time to time to the advantage of the taxpayers. Earlier, the tax rebate amount claimed was just INR 2,500 for any income below 2.5 lakhs. But now, it has increased to 12,500 for income 5 lakhs.

Who is eligible for rebate?

The tax rebate is given to the assessee who fulfils the following criteria:

  1. The taxpayer must be an Indian resident.
  2. The taxpayer should be an Individual and not HUF or a corporate entity.
  3. The tax claim shouldn’t be made on account of loss to the government.
  4. The total income must be less than or equal to INR 5,00,000 in the assessment financial year.
  5. Senior citizens of age less than 80 years can claim rebates under this section.
  6. Senior citizens above 80 years can not claim tax rebates under this section.

Who can’t claim rebate under section 87 A of Income Tax Act?

The NRI’s or Non Resident Indians, the resident Indians whose annual income is more than INR 5 lakh in a financial year and the super senior citizens of age more than 80 years can not claim rebate under section 87 A of the Income Tax Act.

How is 87A rebate calculated?

The tax rebate under section 87 A is calculated on your total taxable income. 

We have discussed the calculation of the Income Tax Rebate through various illustrations in this article. Have a look for a more in depth understanding about Tax Rebates, deductions and exemptions.

  1. Firstly, calculate your gross total income.
  2. Secondly, subtract all the tax saving exemptions and deductions as per section 80 C to 80 U, from it.
  3. Now, calculate your tax liability as per the income tax slab.
  4. Deduct the amount 12,500, if your total taxable income after deducting tax liability is less than or equal to INR 5 lakh.
  5. If not, add the health and education cess at 4% on the tax payable. 

FAQs: Section 87 A of Income Tax Act

1. What is the rebate u/s 87A for AY 2022 23?

The rebate for the financial year 2022-23 is the same in both old and new tax regimes. A taxpayer whose annual income is less than or equal to 5 lakh can claim rebate of maximum INR 12,500 or equal to the amount of tax payable (whichever is lowest).

2. Who can claim rebate u/s 87A?

So, it’s clear that you must fulfil the two criterias to claim a rebate under section 87 A. They must be an Indian citizen and your annual income must be below or equal to INR 5 lakhs in a Financial Year.

3. Can senior citizen claim rebate u/s 87A?

Yes, senior citizens of age 60 to 80 can claim rebate under section 87 A of Income Tax Act. However, super senior citizens whose age is more than 80 years can not claim tax rebate under this section.

Conclusion

Section 87 A of Income Tax Act provides rebate to the taxpayers who earns not more than INR 5 lakh in a financial year. It is available to senior citizens and Indian residents. This helps the taxpayers to save more on taxes. Their income becomes tax free if it’s up to 5 lakhs as they can claim a standard rebate of INR 12,500 on their taxable income. The tax rebate can be filed with the ITR online.

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