The Section 87A of the Income Tax Act, 1961 provides tax relief to individuals who fall within a specific income range. This section was introduced in the Budget 2013 and has been modified several times since then. In this blog post, we will discuss the Section 87A in detail, including its provisions, eligibility criteria, and benefits.
Provisions of Section 87A:
The Section 87A of the Income Tax Act provides tax relief to individuals whose total income falls within a specific range. The section provides a rebate to such individuals to reduce their tax liability. The following are the key provisions of Section 87A:
- Rebate amount: The rebate under Section 87A is available up to Rs. 12,500 for individuals whose total income does not exceed Rs. 5 lakh. This means that if an individual’s total income is less than or equal to Rs. 5 lakh, they will get a rebate of up to Rs. 12,500.
- Applicability: The Section 87A is applicable to individuals only and not to any other category of taxpayers such as HUFs, firms, companies, etc.
- Limitations: The rebate under Section 87A is subject to certain limitations. For instance, the rebate cannot exceed the total tax liability of an individual. This means that if an individual’s total tax liability is less than Rs. 12,500, they will get a rebate equal to their total tax liability.
Eligibility Criteria:
To be eligible for the rebate under Section 87A, an individual must fulfill the following criteria:
- Resident individual: The individual must be a resident of India for the relevant financial year.
- Age limit: The individual must be below 60 years of age at the end of the relevant financial year.
- Income limit: The individual’s total income for the relevant financial year must not exceed Rs. 5 lakh.
Benefits of Section 87A:
The Section 87A provides significant benefits to individuals falling within the eligible income range. Some of the key benefits are:
- Tax relief: The rebate under Section 87A provides tax relief to individuals whose total income falls within the eligible range. This helps such individuals reduce their tax liability and save money.
- Encourages compliance: The Section 87A encourages compliance among individuals who fall within the eligible income range. Since the rebate is available only to individuals who file their income tax returns, it encourages more individuals to file their returns and comply with the tax laws.
- Helps lower-income individuals: The Section 87A helps lower-income individuals who may find it difficult to pay their taxes. The rebate provides them with some relief and reduces their financial burden.
One of the key features of Section 87A is that it provides a tax rebate and not a tax deduction. A tax deduction reduces the taxable income of an individual, whereas a tax rebate reduces the tax liability directly. This means that the rebate amount is deducted from the total tax liability of an individual, rather than from their taxable income.
Another important point to note is that the rebate under Section 87A is available only for individuals with net taxable income up to Rs. 5 lakh. This means that if an individual’s net taxable income exceeds Rs. 5 lakh, they will not be eligible for the rebate.
It is also important to note that the rebate under Section 87A is not applicable to non-resident individuals. This means that if an individual is a non-resident for tax purposes, they will not be eligible for the rebate, even if their net taxable income is below Rs. 5 lakh.
The rebate amount under Section 87A is subject to change from time to time. For instance, in the Budget 2019, the rebate amount was increased from Rs. 2,500 to Rs. 12,500 for individuals with net taxable income up to Rs. 5 lakh. This was a significant increase and provided relief to a large number of individuals falling within the eligible income range.
In addition to the rebate under Section 87A, individuals can also claim other tax deductions and exemptions to reduce their tax liability. For instance, they can claim deductions for investments in tax-saving instruments such as ELSS, PPF, NSC, etc. They can also claim exemptions for certain types of income such as long-term capital gains on equity shares and equity-oriented mutual funds.
In conclusion, Section 87A of the Income Tax Act provides significant tax relief to individuals falling within the eligible income range. It is important for individuals to understand the provisions and eligibility criteria of Section 87A to take advantage of its benefits. They should also explore other tax-saving options to further reduce their tax liability.
Read more useful content:
- section 145 of income tax act
- section 10e of income tax act
- section 9 of the income tax act
- section 94b of income tax act
- section 206aa of income tax act
Frequently Asked Questions (FAQs)
Q: What is the Section 87A of the Income Tax Act?
A: Section 87A provides tax relief to individuals whose total income falls within a specific range. It provides a rebate to such individuals to reduce their tax liability.
Q: Who is eligible for the rebate under Section 87A?
A: To be eligible for the rebate under Section 87A, an individual must fulfill the following criteria:
Resident individual
Below 60 years of age at the end of the relevant financial year
Total income does not exceed Rs. 5 lakh
Q: What is the rebate amount under Section 87A?
A: The rebate under Section 87A is available up to Rs. 12,500 for individuals whose total income does not exceed Rs. 5 lakh.
Q: Is the rebate under Section 87A applicable to non-resident individuals?
A: No, the rebate under Section 87A is not applicable to non-resident individuals. It is applicable only to resident individuals.
Q: Can an individual claim other deductions and exemptions along with the rebate under Section 87A?
A: Yes, an individual can claim other tax deductions and exemptions to reduce their tax liability in addition to the rebate under Section 87A.
Q: Is the rebate under Section 87A available for all categories of taxpayers?
A: No, the rebate under Section 87A is applicable to individuals only and not to any other category of taxpayers such as HUFs, firms, companies, etc.
Q: Is the rebate amount under Section 87A subject to change?
A: Yes, the rebate amount under Section 87A is subject to change from time to time. It is important to check the latest provisions and eligibility criteria before filing income tax returns.
Q: Can an individual claim the rebate under Section 87A multiple times?
A: No, an individual can claim the rebate under Section 87A only once in a financial year. The rebate amount cannot exceed the total tax liability of an individual.
