Section 87A of Income Tax Act AY 2022-23: Eligibility and Benefits

March 17, 2023

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Understanding Section 87A of Income Tax Act AY 2022-23

Section 87A of the Income Tax Act provides tax relief to individuals earning a specific amount of income in a financial year. The section aims to reduce the tax burden on individuals with lower income and provide them with some financial relief. In this blog, we will discuss the various provisions of Section 87A of the Income Tax Act for the assessment year 2022-23.

Applicability of Section 87A

Section 87A is applicable to resident individuals with a net taxable income of up to Rs. 5,00,000 in the financial year 2021-22. However, this limit is subject to certain conditions, which we will discuss in the next section.

Tax Rebate under Section 87A

Section 87A provides a tax rebate to individuals with a net taxable income of up to Rs. 5,00,000. The rebate amount is calculated as follows:

If the net taxable income of an individual is up to Rs. 5,00,000, then the tax rebate amount is Rs. 12,500 or the amount of tax payable, whichever is lower.
If the net taxable income of an individual is above Rs. 5,00,000, then the tax rebate amount is nil.

Conditions for claiming tax rebate under Section 87A

To claim the tax rebate under Section 87A, an individual must fulfill the following conditions:

The individual must be a resident individual. Non-resident individuals are not eligible for the tax rebate under this section.
The individual’s net taxable income should not exceed Rs. 5,00,000 for the financial year 2021-22.
The individual should not be eligible to claim deductions under Section 80C to Section 80U, except for the deduction under Section 80TTA.

Example:

Suppose Mr. X has a net taxable income of Rs. 4,50,000 for the financial year 2021-22. In that case, he is eligible for a tax rebate of Rs. 12,500 under Section 87A. However, if his net taxable income is above Rs. 5,00,000, he will not be eligible for the rebate.

Benefits of Section 87A

Section 87A offers several benefits to individuals with lower income. Some of the benefits are as follows:

Tax Relief: The tax rebate provided under Section 87A helps individuals with lower income to reduce their tax liability. This reduction in tax liability can help individuals manage their finances better and improve their savings.
Increased Disposable Income: The tax relief provided under Section 87A increases the disposable income of individuals with lower income. This increased disposable income can help individuals meet their daily expenses, pay off debts, and invest in their future.
Encourages Savings: The tax relief provided under Section 87A can encourage individuals to save more. With the reduced tax liability, individuals can put aside more money for savings and investments.
Promotes Financial Inclusion: Section 87A promotes financial inclusion by providing tax relief to individuals with lower income. This helps bridge the gap between the rich and the poor and ensures that everyone can benefit from the country’s economic growth.

Conclusion

Section 87A provides tax relief to individuals with lower income, reducing their tax burden and helping them manage their finances better. It is essential to understand the conditions for claiming the tax rebate under this section to ensure that you are eligible for it. If you fulfill the eligibility criteria, you can claim the rebate while filing your income tax returns for the assessment year 2022-23.

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Frequently Asked Questions (FAQs)

Who is eligible for a tax rebate under Section 87A?
Answer: Resident individuals with a net taxable income of up to Rs. 5,00,000 in the financial year 2021-22 are eligible for the tax rebate under Section 87A.

What is the amount of tax rebate under Section 87A?
Answer: The tax rebate amount under Section 87A is Rs. 12,500 or the amount of tax payable, whichever is lower.

What is the limit of net taxable income to claim a tax rebate under Section 87A?
Answer: The limit of net taxable income to claim a tax rebate under Section 87A is up to Rs. 5,00,000 for the financial year 2021-22.

Can non-resident individuals claim a tax rebate under Section 87A?
Answer: No, non-resident individuals are not eligible to claim a tax rebate under Section 87A.

Is the tax rebate under Section 87A applicable for senior citizens and super senior citizens?
Answer: Yes, senior citizens and super senior citizens who fulfill the eligibility criteria are eligible to claim the tax rebate under Section 87A.

What are the conditions for claiming a tax rebate under Section 87A?
Answer: To claim a tax rebate under Section 87A, an individual must fulfill the following conditions:

The individual must be a resident individual.
The individual’s net taxable income should not exceed Rs. 5,00,000 for the financial year 2021-22.
The individual should not be eligible to claim deductions under Section 80C to Section 80U, except for the deduction under Section 80TTA.

Can an individual claim a tax rebate under Section 87A for multiple financial years?
Answer: Yes, an individual can claim a tax rebate under Section 87A for multiple financial years if they fulfill the eligibility criteria.

Is the tax rebate under Section 87A applicable for all types of income?
Answer: No, the tax rebate under Section 87A is applicable only for income earned through salary, pension, or interest.

Can an individual claim a tax rebate under Section 87A if they have income from business or profession?
Answer: No, individuals with income from business or profession are not eligible to claim a tax rebate under Section 87A.

Is the tax rebate under Section 87A applicable for taxpayers who opt for the new tax regime?
Answer: Yes, taxpayers who opt for the new tax regime are eligible to claim the tax rebate under Section 87A if they fulfill the eligibility criteria.