How to claim Income Tax Rebate under Section 87A?

Let us look at the updated rules under section 87A and its applicability as it stands today.

Apr 09, 2020 09:04 IST India Infoline News Service

Section 87A, in its entirety, was proposed in the Finance Bill of 2013 to provide a tax relief to individual taxpayers who fall under the tax slab of 10%. Since then, the act has undergone significant changes. Let us look at the updated rules under section 87A and its applicability as it stands today

Section 87A – Update post Budget FY19-20 (AY 2020-21)
As per the amendments to Section 87A, if your annual taxable income is Rs5 lakh or lower, you can avail the tax rebate. Additionally, the minimum tax rebate limit has been raised to Rs12,500 from the previous limit of Rs2,500. This amount is deducted from your payable income tax. If your payable tax is less than 12,500, the rebate amount would be same as your tax. It is provided before the calculation of cess of 4%

Section 87A – Eligibility (AY2020-21)
You can claim tax rebate under this provision if
You are a resident individual taxpayer of India.
  • Your total income after Deductions (under Section 80) doesn’t exceed Rs5 lakh.
  • The rebate is limited to Rs12,500. This means that if the total tax payable is lower than Rs12,500, then that amount will be the rebate under section 87A. This rebate is applied to the total tax before adding the education cess of 4%
 Points to remember
  • Non-residential Indians are not eligible to get the benefits of this tax rebate.
  • The benefit of this act is not applicable to any Firm/Company/HUF.
  • Super senior citizens are not eligible to get a tax rebate under Section 87A.
  • Tax rebate under Section 87A is not applicable to individuals whose total tax payable is below Rs2,000.

Following are a few examples of the 87A rebate allowed to Resident Individuals including Senior Citizens:  
Total Income (AY 2020-21) Income Tax (A) Rebate (B) Cess = 4% on ( A-B ) Tax Payable (A-B+Cess)
2,50,000 0 0 0 0
3,90,000 7,000 7,000 0 0
5,00,000 12,500 12,500 0 0
5,01,000 12,700 0 508 13,208
 









Section 87A claim process
An individual whose total annual income is less than or equal to Rs5 lakh and whose total tax payable is over Rs2,000 is eligible to claim tax rebate under Section 87A.  This can be done at the time of filing income tax and immediately after adding education cess.  To claim exemption under Section 87A, one has to put the value of tax amount in the column ‘Rebate under Section 87A’ while filling the Income tax return under any respective ITR form - ITR 1, ITR2, ITR4, etc.

Difference between Section 87A in FY18-19 & FY2019-20
Section 87A rebate FY2018-19 is considerably different from Section 87A rebate FY2019-20. Section 87A made way for a rebate for income under 3,50,000 during the FY 2018-2019. This meant that individuals whose tax liability was Rs2,500 or lower did not have to pay any taxes. However, for the FY2019-20, the rebate limit has been revised from Rs2,500 to Rs12,500. This revised rebate limit ensures that individuals whose net taxable income does not exceed Rs5,00,000 do not have to pay any taxes to the government. Let us take a look at section 87A as it is applicable for FY18-19 (AY2019-20)

Section 87A – FY18-19 (AY 2019-20)
A rebate under this section is allowed to taxpayers, a resident individual, whose net total income is below Rs3,50,000. The rebate available is up to Rs2,500 or 100% of the income tax, whichever is lesser. The taxpayer can claim the rebate at the time of filing tax returns, prior to including education cess, secondary and higher education cess.

Section 87A – Eligibility FY18-19 (AY 2019-20)
You can claim tax rebate under this provision if
  • You are a resident individual taxpayer of India.
  • Your total income after Deductions (under Section 80) doesn’t exceed Rs3.5 lakh.
  • The rebate that can be claimed is limited to Rs2,500. This means that if the total tax payable is below Rs 2,500, that amount will be the rebate under section 87A.
 Illustrated below is the difference between the Section 87A in FY18-19 & FY19-20
Income (Rs) Tax Amount in AY (2019-2020) Tax Amount
AY (2020-2021)
Rebate in
 AY (2019-2020)
Rebate in
 AY (2020-2021)
2,90,000 2,000 2,000 2,000 2,000
3,40,000 4,500 4,500 2,500 4,500
3,60,000 5,500 5,500 - 5,500
4,80,000 11,500 11,500 - 11,500
5,00,000 12,500 12,500 - 12,500
6,00,000 32,500 32,500 - -
 

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