Section 87A Rebate Income Tax Act

Section 87A Rebate Income Tax Act | Claim Rebate for FY 2019-20, AY 2020-21

Income Tax Rebate under Section 87A for FY 2019-20, AY 2020-21: A rebate under Section 87A is a kind of income tax provision which helps individuals to reduce their income tax liability. But the individuals who wish to claim the tax rebate under section 87A must make sure that their income should be less than 5 Lakhs. This article helps you to understand everything about how is Section 87A rebate calculated. Read on to find out more.

Eligibility To Claim Rebate u/s 87A FY 2020-21 (AY 2021-22)

Let’s understand for who does the rebate under Section 87A is applicable:

  • For FY 2020-21 / AY 2021-22, the 87A threshold limit is Rs 12,500. This means that if the total tax payable is less than Rs 12,500, the rebate under section 87A will be that amount. Before applying the Education Cess, this rebate is applied to the total tax (4%).
  • Individuals with net taxable income of up to Rs 5 lakhs are eligible for a tax relief under section 87A.
    • Consider the following scenario: Let’s say your annual salary is Rs 6,50,000 and you claim Rs 1,50,000 under section 80C. (available under old tax regime). In your situation, your total net income is Rs 5,00,000, making you eligible for a tax credit of Rs 12,500.
  • The tax rebate under section 87A is limited to a maximum of Rs 12,500. If the tax payable is less than Rs 12,500, say Rs 10,000, the tax rebate will be limited to that amount, i.e. Rs 10,000.
  • To get at the net taxable income, the Tax Assessee must first add all incomes, such as salary, house income, capital gains, business or profession revenue, and income from other sources, and then deduct the appropriate tax deduction amounts u/s 80C to 80U and under section 24(b) (Home Loan Interest). (If you choose the new tax regime, you will be unable to claim income tax deductions under sections 80c, 80d, and so on.)
  • If your net taxable income is less than Rs 5 lakhs, you’ll be eligible for an income tax refund of Rs 12,500, which should be deducted from your total income tax liability (as per the income tax slab rates applicable under old or new tax regimes).
Taxable Income (Rs.) Rebate u/s 87A
Rs. 3,00,000/- 2500/-
Rs. 3,50,000/- 5000/-
Rs. 4,00,000/- 7500/-
Rs. 5,00,000/- 12500/-
Rs. 5,00,100/- Nil

How To Claim Income Tax Rebate?

The rebate can be claimed by the taxpayer before the education cess is added to the tax liability when filing tax returns.

The detailed steps to claim income tax rebate under section 87A are listed below:

  1. Calculation of Gross Income: First add all your earnings which includes salary, capital gains, house rent, and other sources of income.
  2. Net Taxable Income Finding: Apply Section 80 deductions to your gross income if it’s applicable
  3. After subtracting the tax deductions, calculate your total income.
  4. Declare your gross income and tax deductions on an income tax return.

If your net taxable income is less than 5 Lakhs, then you can claim the tax rebate 87A.

Highlights of Section 87A of Income Tax Act

The important points regarding Rebate under Section 87A are given below:

  • This section allows you to claim a deduction of either 100% of your income tax liability or Rs. 2,500. (whichever is lower).
  • The rebate is applied to the total tax amount before the 4% educational cess is added.
  • Individuals are the only ones who are eligible for a rebate under this clause.
    This rebate is not available to corporations, firms, or Hindu Undivided Families.
  • Senior citizens are eligible for a rebate (individuals above the age of 60 years and below 80 years)
  • Section 87A does not provide a rebate to super senior citizens (those who are over the age of 80).

Section 87A Rebate Limit for All Financial Years

The rebate limit for all the financial years are tabulated below:

Financial Year Limit on Total Taxable Income Amount of rebate allowed u/s 87A
2021-22 Rs. 5,00,000 Rs. 12,500
2020-21 Rs. 5,00,000 Rs. 12,500
2019-20 Rs. 5,00,000 Rs. 12,500
2018-19 Rs. 3,50,000 Rs. 2,500
2017-18 Rs. 3,50,000 Rs. 2,500
2016-17 Rs. 5,00,000 Rs. 5,000
2015-16 Rs. 5,00,000 Rs. 2,000
2014-15 Rs. 5,00,000 Rs. 2,000
2013-14 Rs. 5,00,000 Rs. 2,000

FAQ’s on Income Tax Rebate under Section 87A

Question 1.
Is rebate applicable to senior citizens?

Answer:
Senior citizens between the age of 60 years and below the age of 80 years can claim the rebate.

Question 2.
What is the rebate under section 87A for F.Y 2021-22 and who can claim it?

Answer:
A person who is a resident of India and has a total income of less than Rs. 5,00,000 is eligible for a rebate under section 87A. A deduction from the tax liability is offered as a rebate under section 87A. The lower of 100 % liability or Rs. 12,500 will be the amount of the rebate under section 87A. In other words, if the tax due exceeds Rs. 12,500, a rebate will be granted up to Rs. 12,500 only, and if the total income (i.e. taxable income) exceeds Rs. 5,000,000, no rebate will be available.

Question 3.
Can NRIs claim the income tax rebate?

Answer:
No, NRIs cannot claim the income tax rebate under section 87A.

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