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written by Khatabook | July 2, 2021

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

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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

Financial Year

Net Taxable Income

Tax Rebate Limit under Section 87A

2022-2023

₹ 5,00,000

₹ 12,500

2021-2022

₹ 5,00,000

₹ 12,500

2020-2021

₹ 5,00,000

₹ 12,500

2019-2020

₹ 5,00,000

₹ 12,500

2018-2019

₹ 3,50,000

₹ 2,500

2017-2018

₹ 3,50,000

₹ 2,500

2016-2017

₹ 5,00,000

₹ 5,000

2015-2016

₹ 5,00,000

₹ 2,000

2014-2015

₹ 5,00,000

₹ 2,000

2013-2014

₹ 5,00,000

₹ 2,000

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.

FAQs

Q: Is FD interest tax-free?

Ans:

From April 2019 forward, PAN holders will be required to pay 10% tax, and non-PAN holders will be required to pay 20% tax on the interest generated if the interest on an FD is greater than ₹40,000. When yearly interest is credited, this interest will be subtracted as TDS.

Q: What happens if taxable income is above ₹5 lakhs?

Ans:

Individuals with taxable income beyond ₹5 lakhs would still be required to pay tax according to their tax bracket.

Q: How can I lower my tax burden on my salary?

Ans:

  • Make large contributions to retirement savings schemes. 
  • Enrol in a healthcare and childcare services savings plan offered by your employer. 
  • Pay close attention to tax benefits, including the credit for deposits to retirement savings and the deduction for dependents. 
  • Investments that harvest tax losses.

Q: Who is exempt from ITR?

Ans:

You are excluded from filing an ITR if you’re an Indian resident and were 75 years of age or older in the prior year, – i.e., in FY 2021–2022.

Q: When was Section 87A introduced?

Ans:

The 2013 Finance Act included the introduction of Section 87A of the Income Tax Act. The segment was created to offer advantages to those whose combined net income is less than ₹5,00,000.

Q: How is the 87A rebate calculated?

Ans:

Assess your total income and deduct all permitted reductions under Sections 80-C to 80-U to arrive at the refund amount under Section 87A. You can now receive a rebate of up to ₹12500 on the tax due prior to the health and educational cess, provided your gross taxable income is below ₹5 lakhs.

Q: Who is eligible for section 87A?

Ans:

A resident of India with an annual income of no more than ₹5,00,000 is eligible to apply for a refund under section 87A. Section 87A reimbursement is offered as a reduction from the tax obligation. The amount of the Section 87A rebate will be equal to the smaller sum out of 100% of the tax due or ₹12500.

Q: Who is not eligible for the 87A rebate?

Ans:

Calculate your overall annual income and convert Section 80-C liabilities to Section 80-U liabilities. If the amount is less than ₹5 lakhs, you qualify for a tax credit, meaning that the whole tax up to ₹12500 will be refunded in accordance with Section 87A. No rebate could be requested if taxable income exceeds ₹5 lakh.

Q: What is the rebate u/s 87A for AY 2022 23?

Ans:

Under the new income tax systems, the refund payment under Section 87A for FY 2021–22 has remained the same. A resident taxpayer will receive a tax credit of ₹12,500 or equivalent to the amount of taxes due if their taxable income is less than ₹5,00,000.

Disclaimer :
The information, product and services provided on this website are provided on an “as is” and “as available” basis without any warranty or representation, express or implied. Khatabook Blogs are meant purely for educational discussion of financial products and services. Khatabook does not make a guarantee that the service will meet your requirements, or that it will be uninterrupted, timely and secure, and that errors, if any, will be corrected. The material and information contained herein is for general information purposes only. Consult a professional before relying on the information to make any legal, financial or business decisions. Use this information strictly at your own risk. Khatabook will not be liable for any false, inaccurate or incomplete information present on the website. Although every effort is made to ensure that the information contained in this website is updated, relevant and accurate, Khatabook makes no guarantees about the completeness, reliability, accuracy, suitability or availability with respect to the website or the information, product, services or related graphics contained on the website for any purpose. Khatabook will not be liable for the website being temporarily unavailable, due to any technical issues or otherwise, beyond its control and for any loss or damage suffered as a result of the use of or access to, or inability to use or access to this website whatsoever.
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Disclaimer :
The information, product and services provided on this website are provided on an “as is” and “as available” basis without any warranty or representation, express or implied. Khatabook Blogs are meant purely for educational discussion of financial products and services. Khatabook does not make a guarantee that the service will meet your requirements, or that it will be uninterrupted, timely and secure, and that errors, if any, will be corrected. The material and information contained herein is for general information purposes only. Consult a professional before relying on the information to make any legal, financial or business decisions. Use this information strictly at your own risk. Khatabook will not be liable for any false, inaccurate or incomplete information present on the website. Although every effort is made to ensure that the information contained in this website is updated, relevant and accurate, Khatabook makes no guarantees about the completeness, reliability, accuracy, suitability or availability with respect to the website or the information, product, services or related graphics contained on the website for any purpose. Khatabook will not be liable for the website being temporarily unavailable, due to any technical issues or otherwise, beyond its control and for any loss or damage suffered as a result of the use of or access to, or inability to use or access to this website whatsoever.