Income Tax Rebate Under Section 87A - A Complete Guide


Introduction to Tax Rebate under Section 87A

Income tax is a compulsory tax levied by the government on the income earned by individuals, businesses, and other entities. However, the government provides certain tax benefits and rebates to taxpayers to ease the burden of taxes and encourage them to invest more in tax-saving instruments. One such tax benefit is the tax rebate under Section 87A of the Income Tax Act 1961.

In this article, we will discuss the tax rebate under Section 87A in detail, including its eligibility criteria, how to claim the rebate, and recent changes in the provisions.

Eligibility Criteria for Tax Rebate under Section 87A

The tax rebate under Section 87A is available to resident individuals, including senior citizens (between 60 and 80 years of age) and resident Hindu Undivided Family (HUF) whose total taxable income does not exceed Rs. 5 lakhs in a financial year. Super senior citizens (above 80 years of age) are not eligible to avail of the rebate under Section 87A.

How to Claim Tax Rebate under Section 87A

To claim the tax rebate under Section 87A, you need to follow the steps given below:

  1. Calculate your Gross Total Income: Your Gross Total Income is the sum of all the income earned by you in a financial year, including salary, business income, capital gains, and other sources of income.

  2. Deduct Tax Deductions: Deduct the tax deductions claimed for tax-saving investments, such as Public Provident Fund (PPF), National Savings Certificate (NSC), and Equity-Linked Savings Scheme (ELSS) from the Gross Total Income to arrive at your taxable income.

  3. Calculate Tax Liability: Use the taxable income to calculate your tax liability as per the income tax slab rates. Do not include the health and education cess while calculating the tax liability.

  4. Claim Tax Rebate: You can claim the tax rebate under Section 87A on your gross tax liability before the health and education cess. The rebate is equal to either Rs. 12,500 or the tax liability, whichever is lower.

  5. File Income Tax Returns: To claim the rebate under Section 87A, you must file your income tax returns within the due date, usually July 31st of the assessment year.

Recent Changes in the Provisions of Section 87A

The provisions of Section 87A have undergone several changes since its introduction in 2013. The latest changes in the provisions of Section 87A for the financial year 2020-21 are as follows:

  1. Increase in the Rebate Limit: The tax rebate limit under Section 87A has been increased from Rs. 2,500 to Rs. 12,500 for the financial year 2020-21.

  2. Increase in the Income Limit: The income limit for availing of the tax rebate under Section 87A has been increased from Rs. 3.5 lakhs to Rs. 5 lakhs for the financial year 2020-21.

  3. Rebate Available under New Regimes: The tax rebate under Section 87A is available under both the old and new income tax regimes.

Conclusion

The tax rebate under Section 87A is a valuable tax benefit available to resident individuals and HUF whose taxable income does not exceed Rs. 5 lakhs. The rebate helps in reducing the tax liability and saving money on taxes. To avail of the rebate, you need to calculate your taxable income, calculate your tax liability, and file your income tax returns within the due date. With the recent changes in the provisions of Section 87A, the rebate limit and income limit have been increased, making it more beneficial for the taxpayers

Comments

Post a Comment

Popular posts from this blog

How do I write a copyright description in our YouTube videos?

Introduction: If you're a content creator on YouTube, it's important to include a copyright description in your videos. This not only helps to protect your work, but it also helps to give credit to any sources that you may have used in your video. In this article, we'll go over the steps for writing a copyright description for your YouTube videos and provide some tips for making it as effective as possible. What is a Copyright Description? A copyright description is a statement that appears in the metadata of your YouTube video. It typically includes information about the creator of the video, any sources that were used, and any applicable copyright or licensing information. This information is important because it helps to identify the ownership of the video and ensures that the appropriate parties are credited for their work. Why is it Important to Include a Copyright Description? There are a few reasons why it's important to include a copyright description in your Yo...
Read more

Who is not eligible for 87A rebate?

Image
Introduction Income tax is a significant source of revenue for the government, and therefore, the government provides various tax benefits and rebates to taxpayers to promote compliance and ease the tax burden on certain categories of taxpayers. One such benefit is the 87A rebate, which is a rebate available to individual taxpayers whose taxable income is below a specified threshold. In this article, we will discuss who is not eligible for the 87A rebate. What is 87A Rebate? Tax Rebate Under Section 87A is provided to individual taxpayers with an annual income of up to Rs. 5,00,000. The maximum rebate available under Section 87A of the Income Tax Act is Rs. 12,500. It means that if your total tax liability is less than or equal to Rs. 12,500, you will be eligible for the full rebate of Rs. 12,500. Who is not eligible for 87A Rebate? While the 87A rebate is available to most individual taxpayers with an annual income of up to Rs. 5,00,000, there are certain categories of taxpayers who ...
Read more