Income Tax Rebate

Income Tax Rebate Under Section 87A

An income tax rebate can simply be understood as a form of refund on taxes that you receive from the Income Tax Department under certain circumstances. An individual is liable to receive a tax rebate in the event that he or she pays more taxes in a financial year than they owe to the government. In order to avail a tax rebate, you must make sure to accurately compute your tax liability and file your tax returns within a particular time period.

The income tax rebate provided in Section 87a is offered for people who have a salary below the predefined limit. Basically, this act is there to bring down the tax burden for lower salary bracket people.

The rebate under Section 87A was first proposed in the year 2013 and has been in effect for several years, with it being updated as recently as 2019. Under the latest provisions of Section 87a, any individual with an annual taxable income of up to Rs 5 lakhs is eligible for an income tax rebate of Rs 12,500. This essentially translates to the fact that individuals with an annual income lower than Rs 5 lakhs are entirely exempted from income tax and can effectively save income tax in India.

Steps to claim a tax rebate under section 87A

1. Calculate your gross total income for the financial year
2. Reduce your tax deductions for tax savings, investments etc.
3. Arrive at your total income after reducing the tax deductions.
4. File an income tax return declaring your gross income and tax deductions.
5. Claim a tax rebate under section 87A if your total income does not exceed Rs 5 lakh.
6. The maximum rebate under section 87A for the AY 2021-22 is Rs 12,500.

Eligibility to claim rebate u/s 87A FY 2021-22

One can claim the benefit of rebate under section 87A for FY 2020-21 only if the following conditions are satisfied:
1. One must be a resident individual taxpayer of India.
2. The total income after reducing the deductions under chapter VI-A (Section 80C, 80D and so on) should not exceed Rs 5 lakh.
3. One can avail a tax rebate capped at Rs 12,500. Therefore, if your total tax payable is less than this amount, only such amount is eligible for the tax rebate offered under section 87A, rebate can’t be more than the tax payable. Keep in mind that the education cess of 4% is added after the tax rebate on tax liability.