Learn the essentials of Income Tax Rebate. Know all about Section 87A. Check Tax Rebate for the Individuals for Assessment year 2017-18. For more details regarding Income Tax Rebate under Section 87A, read the full article.
What is Income Tax Rebate?
A Tax rebate is an amount paid by way of reduction, return, or refund on what has already been paid or contributed. The Income Tax Rebate in India is allowed for Individuals whose income falls under the tax slabs. Tax rebate rates are updated for every financial year as per the directions of the Indian government. The modifications made in the rebate structure are announced in Union Budget of the respective year.
Tax Rebate in India
Section 87A of the Income Tax Act, 1961 was inserted by the Finance Act, 2013 with effect from 01-04-2014. The section 87A provides for an income tax rebate up to Rs. 2000/-(F.Y 2013-14) to Individuals having Taxable Income not exceeding Rs. 5,00,000/-. In Union Budget 2016, the Income Tax Rebate has been increased from Rs. 2000/- to Rs. 5,000/- and would be applicable from F.Y. 2016-17 onwards. The Rebate of Rs. 5,000/- would be given from the Total Tax payable by an Individual. It is pertinent to note here that this Rs. 5,000/- is to be subtracted from the Total Tax Payable and not from the Total Income of an Individual.
Eligibility for Income Tax Rebate
With a view providing tax relief to the individual assesses who are in lower income bracket a refund is provided for under Section 87A.
The rebate will be available if the assessee satisfies the following eligibilities.
- The Taxpayer is a resident individual( may be an ordinary resident or not ordinary resident).
- The Total Income or taxable income (i.e. gross total income minus deductions under Section 80C to 80U) is Rs. 5,00,000/- or less.
Income Tax Rebate Key Features
The following are the salient features of Income Tax Rebate u/s 87A.
- Under Section 87A Tax Rebate is only available to Individuals. All categories of Individuals whether female or male or Senior Citizens are eligible to claim Income Tax Rebate as per Section 87A. The taxpayer under the class like HUF, LLP, Partnership Firms, Companies, LLP, etc. is not eligible to claim Income Tax Rebate under this section.
- Income Tax Rebate u/s 87A is only available to Resident Individuals and not to Non-Resident Individuals.
- From Financial Year 2016-17 onwards the total rebate allowed under section 87A would be Rs. 5,000/- or the total tax is payable (whichever is less).
- Income Tax Rebate of Rs. 5,000/- is allowed before the levy of Education Cess and Secondary High Education Cess. In other words, Education Cess and SHEC-Secondary High Education Cess would be levied on the tax payable after allowing for Income Tax Rebate of Rs. 5,000/-.
- For Super Senior Citizen (Aged above 80 years) There is no benefit of this Rebate as their Income up to Rs. 5,00,000/- is already exempted from the levy of Income Tax.
Note: Rebate under Section 87A is not available for the case of a non-resident individual, resident or non-resident HUF/ AOP/ BOI or any taxpayer other than a resident individual.
Tax Rebate for Senior Citizens
The Income Tax Act, 1961 has made provisions for tax rebates for senior citizens(aged over 65 years). The Section 88B contains all details about such tax rebates. But, the most significant fact about such rebates is that the individual concerned is entitled to receive rebates till Rs. 20,000/- depending upon the amount of tax payable on him.
Note: Rebate benefits u/s 87Ais not available to super senior citizens.
Income Tax Rebate Calculation
As Section 87A provides for Income Tax Rebate, the assessee will first compute the Total Tax Payable and then reduce Rs. 5,000/- from this Tax payable provided his Total Income is less than Rs. 5,00,000/-. If taxpayer’s Total Income is more than Rs. 5,00,000/-, then he won’t be able to claim income tax rebate under Section 87A.
- The Net Taxable Income of Rs. 5,00,000/- is the total of incomes under all heads i.e. House Property, Salary, Capital Gains, Business or Profession, and Other Sources.
- In case, there is any loss under any head due to the payment of housing loan or for any other reason, such loss would also be deducted from the total income.
- Tax Deductions from Section 80C to Section 80U under Chapter VI-A would also be allowed, and the resultant figure i.e. Total Income should be less than Rs. 5,00,000/- for an individual to claim income tax rebate of Rs. 5,000/- under Section 87A.
Let’s have a look at the Income Tax Rebate Calculation for the F.Y 2013-14, (rebate rate for 2013-14 is Rs. 2,000/-).
Example: Rebate Calculation
Net Income= Rs. 2,60,000/-.
Net Income = Rs. 5,00,000/-.
Net Income = Rs. 6,50,000/-.
|Particulars||Case I||Case II||Case III|
|Net Income||Rs. 2,60,000/-||Rs. 5,00,000/-||Rs. 6,00,000/-|
|Income Tax on Net Income.
Rs. 2,50,000/- to Rs. 5,00,000/- ==> 10%
Rs. 5,00,000/- to Rs. 10,00,000/-==> 20%
|Rs. 1,000/-||Rs. 25,000/-||Rs. 55,000/-|
|Less: Rebate under Section 87A(minus)||Rs. 1,000/-||Rs. 5,000/-||Nil (rebate available upto Rs. 5,00,000/-)|
|Balance||NIL||Rs. 20,000/-||Rs. 55,000/-|
|Total||NIL||Rs. 20,000/-||Rs. 55,000/-|
|2 % of Education Cess (ADD)||NIL||Rs. 400/-||Rs. 1,100/-|
|1% of Secondary & Higher Education Cess (ADD)||NIL||Rs. 200/-||Rs. 550/-|
|Tax Liability||NIL||Rs. 20,600/-||Rs. 56,650/-|
How to Claim Refund up to Rs. 5,000/-?
Let us take a look at the Claiming procedure for Income Tax Rebate under Section 87A after filing Income Tax Return.
- If the taxpayer satisfies the eligibility for the tax rebate, the resident individual can claim the rebate u/s 87A. The Rebate is available from the A.Y 2014-15 onwards. The amount of rebate is 100% of the income tax payable on the total income or Rs. 5,000/-, whichever is less. This rebate is available from income tax ( Before adding Surcharge and Education Cess).
- However, the taxpayer has to file your Income Tax Return within due date and rebate shall be claimed while filing the return just before adding the Education Cess, Secondary Education, and Higher Education Cess.
Chart of Tax Rebate Under Section 87A
|S.no||Net Income||Income Tax||Rebate u/s 87A||Net Tax||Education Cess||SHE Cess||Tax liability|
|2.||Rs. 2,60,000/-||Rs. 1000/-||Rs. 1,000/-||–||–||–||–|
|3.||Rs. 2,70,000/-||Rs. 2,000/-||Rs. 2,000/-||–||–||–||–|
|4.||Rs. 2,80,000/-||Rs. 3,000/-||Rs. 3,000/-||–||–||–||–|
|5.||Rs. 2,90,000/-||Rs. 4,000/-||Rs. 4,000/-||–||–||–||–|
|6.||Rs. 3,00,000/-||Rs. 5,000/-||Rs. 5,000/-||–||–||–||–|
|7.||Rs. 3,50,000/-||Rs. 10,000/-||Rs. 5,000/-||Rs. 5000/-||Rs.100/-||Rs.50/-||Rs. 5,150/-|
|8.||Rs. 4,00,000/-||Rs. 15,000/-||Rs. 5,000/-||Rs. 10,000/-||Rs. 200/-||Rs. 100/-||Rs. 10,300/-|
|9.||Rs. 4,50,000/-||Rs. 20,000/-||Rs. 5,000/-||Rs. 15,000/-||Rs. 300/-||Rs. 150/-||Rs. 15,450/-|
|10.||Rs. 5,00,000/-||Rs. 25,000/-||Rs. 5,000/-||Rs. 20,000/-||Rs. 400/-||Rs. 200/-||Rs. 20,600/-|