The Income Tax Act, 1961, is a comprehensive legislation that governs the taxation of income in India. It provides for various provisions, deductions, exemptions, and reliefs to taxpayers. One such relief is provided under Section 87A of the Income Tax Act, 1961, which offers a rebate to low-income earners. In this blog, we will discuss Section 87A in detail and understand its applicability.
What is Section 87A of Income Tax Act, 1961?
Section 87A of the Income Tax Act, 1961, provides a rebate to resident individuals whose total income does not exceed a certain limit. The section was introduced in the Finance Act, 2013, and has been amended over the years to provide relief to low-income earners.
As per the latest amendment, for the financial year 2022-23, an individual is eligible for a rebate under Section 87A if his/her total income does not exceed Rs. 5,00,000. The maximum amount of rebate available is Rs. 12,500, which means that if an individual’s tax liability is less than Rs. 12,500, he/she can claim a rebate equal to the amount of tax liability.
It is important to note that the rebate under Section 87A is available only to resident individuals and not to Hindu Undivided Families (HUFs), firms, companies, or any other type of taxpayer.
How to calculate the rebate under Section 87A?
To calculate the rebate under Section 87A, the following steps need to be followed:
Step 1: Calculate the total income, which includes income from all sources, such as salary, business, profession, house property, and capital gains.
Step 2: Deduct all applicable deductions under Chapter VI-A, such as Section 80C, 80D, 80G, etc.
Step 3: If the resulting income is less than or equal to Rs. 5,00,000, then the individual is eligible for a rebate under Section 87A.
Step 4: Calculate the tax liability on the income after deducting the rebate amount.
Step 5: If the tax liability is less than or equal to Rs. 12,500, then the individual can claim a rebate equal to the tax liability.
For example, if an individual has a total income of Rs. 4,80,000, and he/she has claimed a deduction of Rs. 1,50,000 under Section 80C, then the taxable income will be Rs. 3,30,000. As the taxable income is less than Rs. 5,00,000, the individual will be eligible for a rebate under Section 87A. The tax liability on Rs. 3,30,000 will be Rs. 6,500, but as the maximum rebate available is Rs. 12,500, the individual can claim a rebate of Rs. 6,500, and his/her tax liability will become zero.
Conclusion
Section 87A of the Income Tax Act, 1961, is a beneficial provision for low-income earners. It provides a rebate on tax liability, which can be claimed by resident individuals whose total income does not exceed Rs. 5,00,000. The maximum rebate available is Rs. 12,500, which means that an individual can claim a rebate equal to his/her tax liability if it is less than or equal to Rs. 12,500. The rebate is a significant relief for taxpayers and reduces their tax burden.
Read more useful content:
- section 234e of income tax act
- section 286 of income tax act
- section 90a of income tax act
- section 40a(7) of income tax act
- section 226(3) of income tax act
- section 24 of income tax act
Frequently Asked Questions (FAQs)
Q. What is Section 87A of the Income Tax Act, 1961?
A. Section 87A of the Income Tax Act, 1961, provides a rebate to resident individuals whose total income does not exceed a certain limit. The section was introduced in the Finance Act, 2013, and has been amended over the years to provide relief to low-income earners.
Q. Who is eligible for a rebate under Section 87A?
A. An individual is eligible for a rebate under Section 87A if his/her total income does not exceed Rs. 5,00,000 for the financial year 2022-23. The rebate is available only to resident individuals and not to Hindu Undivided Families (HUFs), firms, companies, or any other type of taxpayer.
Q. What is the maximum amount of rebate available under Section 87A?
A. The maximum amount of rebate available under Section 87A is Rs. 12,500. If an individual’s tax liability is less than Rs. 12,500, he/she can claim a rebate equal to the amount of tax liability.
Q. How is the rebate under Section 87A calculated?
A. To calculate the rebate under Section 87A, the total income is first calculated, which includes income from all sources, such as salary, business, profession, house property, and capital gains. All applicable deductions under Chapter VI-A, such as Section 80C, 80D, 80G, etc., are then deducted from the total income. If the resulting income is less than or equal to Rs. 5,00,000, then the individual is eligible for a rebate under Section 87A. The tax liability on the income after deducting the rebate amount is then calculated, and if the tax liability is less than or equal to Rs. 12,500, then the individual can claim a rebate equal to the tax liability.
Q. Can the rebate under Section 87A be claimed by HUFs, firms, or companies?
A. No, the rebate under Section 87A is available only to resident individuals and not to Hindu Undivided Families (HUFs), firms, companies, or any other type of taxpayer.
Q. Is the rebate under Section 87A available to non-resident individuals?
A. No, the rebate under Section 87A is available only to resident individuals and not to non-resident individuals.
Q. Can the rebate under Section 87A be claimed by senior citizens or super senior citizens?
A. Yes, senior citizens and super senior citizens are also eligible for the rebate under Section 87A, provided their total income does not exceed Rs. 5,00,000 for the financial year 2022-23.
Q. Is the rebate under Section 87A available for all financial years?
A. No, the eligibility criteria and the maximum amount of rebate under Section 87A may change every financial year. Therefore, it is important to check the latest provisions of Section 87A before claiming the rebate.
