How to Get the Income Tax Rebate Under Section 87A?

The Income Tax Act of 1961 has a number of provisions that grant tax relief to people and reduce their tax obligations. Section 87A of the Income Tax Act is one such clause. When an individual has a net taxable income of less than 5,00,000 in a given fiscal year, they are eligible for a tax refund under Section 87A. A tax rebate of up to Rs. 12,500 is available to eligible applicants, or the entire amount of tax due in an assessment year, whichever is less (before adding cess).

Did You Know? In compliance with Section 87A of the Income-Tax Act, you are eligible to receive a maximum rebate of Rs. 12,500 for the fiscal year 2022–23. 

Section 87A – Income Tax Rebate 

The income tax refund provided by Section 87A provides some assistance to taxpayers who are subject to the 10% tax rate. Section 87A of the Income Tax Act, 1961 allows anyone whose net yearly income is less than ₹5 lakhs to get a tax refund. This indicates that a person may receive tax relief of up to ₹12500. As a result, the deductions will be either ₹12500 or 100% of the employee's income, whichever is less. 

Additionally, the overall sum of the rebate cannot exceed the income tax computed before the rebate on the person's overall income with whom they would be jointly taxed for the evaluation year. 

Also read: AIS Income Tax - Learn all about Annual Information Statement in Detail | Khatabook

Section 87A – Points to Remember

The key aspects of Section 87A are listed below: 

• Section 87A was introduced to the Income Tax Act of 1961, and it took effect on April 1, 2019, the start of the new fiscal year.  
• Only Indian residents can avail of this refund. An Aadhar card, as well as a birth certificate, are required as proof of citizenship. You will then be able to submit a Section 87A tax relief application. A non-resident Indian, however, is not eligible to seek reimbursement under this clause. 
• This tax refund is available to both male and female assesses. If your salary is within the required range, you can apply for a refund regardless of your gender. 
• Rebate is applicable to those under a specific income: Section 87A allows those whose incomes do not exceed ₹3,50,000 to apply for the reimbursement. This discount, which has a cap of ₹2,500, is provided before the 3% education levy. However, you can only get a maximum deduction of ₹5,000 if your taxable income is somewhere between ₹3,50,000 to ₹5,00,000. 
• Seniors who are older than 80 are ineligible for a tax break: Seniors who are older than 60 are not allowed to claim a tax refund. The good news is the fact that the income tax bracket has increased the elderly citizen exemption amount from ₹10,000 to ₹50,000 annually.  
• In addition, if the total tax due is less than ₹12500, Section 87A of the Income-tax Act limits the tax break to that amount. 
• Only individuals can apply for a rebate: Therefore, no tax refund request under this clause could be made by Hindu undivided families, businesses, or enterprises. Only a "person" is qualified to submit an application for a tax rebate under Section 87A. 

Maximum Tax Rebate Limit Over the Years

Also read: Section 269ST of the Income Tax Act & Penalty for Violation of 269ST Explained

How to Calculate Tax Rebate Under Section 87A?

It is simple to figure out the refund under Section 87A of the Income Tax Act. You only need to determine whether your revenue is below ₹5 lakhs while considering the necessary deductions. To find out what taxes and rebates are relevant to you, just follow these easy steps: 

• Determine your gross yearly income for the fiscal year. 
• Know every deduction you may include in your ITR. Ensure you are aware of all the investments, contributions, and other appropriate deductions you may utilise to lower your yearly income. 
• From the total income, subtract the appropriate deductions, and you will receive the net taxable income as a result. 
• You won't be required to pay any taxes if your income falls below ₹5 lakhs (for the relevant fiscal years). On the other side, you will be required to pay the appropriate tax amount if your revenue is greater than ₹5 lakhs. 

Section 87A – Claim Process 

A person may be qualified for the income tax subsidy under Section 87A if their annual earnings are less than ₹5 lakh and they owe more than ₹2,000 in taxes. When completing your income tax return, you can do this right after including the higher education levies or educational cess. To obtain tax refunds under Section 87A, the steps below must be followed in order: 

• The taxpayer must be aware of the fiscal year's Gross Total Income. 
• Subtract the possible tax deductions for investments, tax reductions, etc. 
• Deductions will be subtracted before computing the Total Income. 
• When submitting the ITR, the individual is required to provide both their gross income and their deductions. 
• The person can apply for a tax refund under Section 87A following the ITR. 
• Section 87A offers a maximum tax credit of ₹12,500. (For the 2021–2022 assessment year) 
• It is crucial to be aware that if Section 87A refunds are to be requested, the total income cannot exceed ₹5 lakhs. 

Also read: Section 195 of Income Tax Act - Tds Under Section 195, Learn About the Rate of Tds Under Section 195

Conclusion: 

Your taxable income determines whether you qualify for a tax rebate. The maximum claimable refund under section 87A is ₹12,500. The fact that taxable income is determined using more than simply a tax slab is crucial in this case. A discount is also available to those making ₹8 lakh or more. Taxpayers (up to the age of 60) have two options for receiving a refund. One, where the gross annual income is less than ₹5 lakh. In this case, submitting an ITR is sufficient. Second, your taxable income becomes eligible for a refund even though your gross income, let's say, is ₹8 lakh, and you have deductions under Section 80C. Another option to receive a rebate is to include these reductions in your tax filings. Follow Khatabook for the latest updates, news blogs, and articles related to micro, small and medium businesses (MSMEs), business tips, income tax, GST, salary, and accounting.