Bytes

Bytes - Your weekly dose of
investments, taxes, finance & more.

IT Portal 2.0
www.incometax.gov.in

IT Portal 2.0

Check out the latest videos explaining the various features of the new portal
www.incometax.gov.in
previous arrow
next arrow

Rebate Under Section 87A - Income Tax Rebate

author portrait

Maharshi Shah

Income Tax
Tax Rebate
Tax Savings & Deductions
Last updated on April 29th, 2021

The taxes paid by the citizens of India are utilized for the purpose of improving of the country’s economy. The Income Tax Department has created different tax slab rates for individuals with a different set of income. In order to make sure that the people with low taxable income do not get burdened with paying more taxes, the government has also set up provisions like claiming income tax rebate u/s 87A to reduce the tax liability of these people.

What is Income Tax Rebate Under Section 87A?

Under Section 87A of the Income Tax Act, 1961, resident individuals whose net taxable income is less or equal to INR 5,00,000 will be able to claim a tax rebate of a maximum of INR 12,500 or the amount of tax payable, whichever is lower.

What are the Eligibility Criteria to Claim a Rebate u/s 87A?

Individuals can claim rebate u/s 87A if they fall under the following criteras:

Residential Status Calculator
Residential Status Calculator for Income Tax. Taxability in India depends on residential status. Know your residential status from Resident, NRI, Resident but Not Ordinarily Resident(RNOR)
Explore
Residential Status Calculator
Residential Status Calculator for Income Tax. Taxability in India depends on residential status. Know your residential status from Resident, NRI, Resident but Not Ordinarily Resident(RNOR)
Explore

How to calculate Tax Rebate u/s 87A?

Following are the steps to calculate the tax rebate amount:

  1. Add all your incomes

    To calculate the rebate amount one needs to add their incomes from all sources to arrive at Gross Total Income

  2. Claim Chapter VIA Deductions

    Now reduce the tax liability by claiming all the applicable chapter VIA deductions

  3. Arrive at Net Taxable Income

    Arrive at your net taxable income after claiming the tax deductions

  4. Net Taxable Salary is less than or equal to INR 5 lacs

    After applying all applicable deductions if your net taxable salary is less than or equal to INR 5,00,000 than you are eligible to claim a rebate under section 87A

Let us take an example to understand the calculations better:

Mr Kumar, age 45 is a salaried residential individual.

Particulars for FY 20-21 Income
Gross Total Income 6,00,000
Deductions 1,50,000
Net Taxable Income: 450,000
Tax Payable before cess(5% INR 2.5 to INR 5 lakh) 10,000
Tax Rebate u/s 87A (INR 12,500 or tax payable whichever is lower) 10,000
Tax Payable Nil

FAQs

Can HUF’s claim tax rebate under section 87A?

No, only resident individuals can claim a rebate under this section. Companies and HUF cannot avail this benefit.

Can I claim a tax rebate of flat INR 12,500?

No, individuals are entitled to claim tax rebate u/s 87A of INR 12,500 or 100% of tax liability amount whichever is lower

Got Questions? Ask Away!

  1. Hey @HarshitShah

    Senior citizens (above 60 years and below 80 years) are eligible to claim income tax rebate under section 87A. Below mentioned is the way in which the calculation of taxable income will take place:

    Particulars Income
    Gross Total Income 6,50,000
    (-)Basic Exemption Limit (For Senior citizen) 3,00,000
    Taxable Income 3,50,000
    Tax Payable before cess(5% INR 2.5 to INR lakh) 5000
    Tax Rebate u/s 87A (INR 12,500 or tax payable whichever is lower) 5000
    Tax Payable Nil

    Hope this helps! :slight_smile: