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All you need to Know about Tax Rebate under Section 87A

Narendra Kumar

| Updated: Jun 26, 2019 | Category: Income Tax

Tax-Rebate

The Indian tax laws have provisions under the Section 87A, Income Tax Act to lighten the burden of tax liabilities of taxpayers. One of these provisions is Tax rebate . These laws are very helpful to the Indian residents, especially for the low income class individuals. The government provides these generally in the form of rebates, tax exemptions, etc.

What is Section 87A in Income Tax?

The Section 87A is a provision under The Income Tax Act to marginally reduce the payable tax amount of individuals. To better understand about the rebate in the Section 87A, firstly we will learn about some of the terms used in taxation. These are Tax Refund, Tax Rebate, Tax Exemption, and Taxable Income.

Tax Rebate

A kind of tax relief given to individuals depending on the amount of their total income is Tax rebate. A rebate is calculated by deducting the relief amount from the total income and then the tax is taken off from the deducted amount.

income tax act

Tax Refund

When the amount paid tax by the taxpayer is more than the actual tax amount to be paid, In that case the extra amount is returned to the taxpayer. This is tax refund.

Tax Exemption

Similarly, Tax exemption is the money related exclusion which reduces the taxable income.

Taxable Income

This is base of the total income amount of an individual upon which the income tax system imposes the tax.

Subsequently, The Income Tax Laws of India provides specific reliefs or rebates to reduce the tax liabilities of taxpayers after the formation of Section 87A.

section 87 a

What is Tax Rebate under Section 87A?

Rebate under Section 87 A provides reduction in the payable tax amount. The rebate is either less than the 100% of the income tax liability or Rs. 2500 whichever is less. This amount is for incomes up to 2.5 lakhs and no rebate is available to individuals having income of more than 3 lakhs according to the current law which will be increased to 5 lakhs in the next financial year.

Who can Claim Tax Rebate under Section 87A

The Income tax is a way to reduce to tax amount. Individuals that lie under the following categories can take benefit from it:

  • Only the citizens of India can avail this type of tax relief. As a proof of the citizenship the tax applicant have to submit the Aadhar card and a proof of birth.
  • Irrespective of the gender of the taxpayer they are eligible for rebates unless their income is under the prescribed income amount.
  •  The rebate is only available for taxpayers under specified income range. The total income after deductions according to Section 80, Income Tax Act should not be more than Rs. 3.5 lakhs.
  •  The rebate amount is fixed to a maximum of Rs. 2500. This amount is available before adding the Education Cess of 3%.
  • Individuals having total income more than Rs. 3.5 lakhs can claim a rebate of up to Rs. 5000
Total Income Tax liability before Cess Rebate amount
2 lakhs 65 thousand 750 750
2 lakhs 70 thousand 1000 1000
3 lakhs 2500 2500
3 lakhs 50 thousand 5000 5000

Eligibility for Tax Rebate according to FY 2019-20

These rules are under the Financial Year 2019-20 or the Assessment year 2020-21;

  • Only the citizens of India can avail this type of tax relief. As a proof of the citizenship the tax applicant have to submit the Aadhar card and a proof of birth.
  • The total income after deductions according to Section 80, Income Tax Act should not be more than Rs. 5 lakhs to claim rebate
  • The rebate amount is fixed to a maximum of Rs. 12,500. This amount is available before adding the Education Cess of 3%.
Total Income Tax liability before Cess Rebate amount
2 lakhs 70 thousand 1000 1000
3 lakhs 60 thousand 3000 3000
4 lakhs 90 12000 12000
12 lakhs 17200 0

Eligibility for tax rebate according to FY 2017-18

These rules are under the Financial Year 2017-18 or the Assessment year 2018-19;

  • Thereby, the citizens of India can avail this type of tax relief. As a proof of the citizenship the tax applicant have to submit the Aadhar card and a proof of birth.
  • However, the rebate is only available for taxpayers under specified income range. The total income after deductions according to Section 80, Income Tax Act should not be more than Rs. 3.5 lakhs.
  • The rebate amount is fixed to a maximum of Rs. 2500. This amount is available before adding the Education Cess.
Total Income Tax liability before Cess Rebate amount
2 lakhs 65 thousand 750 750
2 lakhs 70 thousand 1000 1000
3 lakhs 2500 2500
3 lakhs 50 thousand 5000 2500

A Glimpse of Income Tax Act 1961

Income Tax Act was formed by the Government of India to formulate laws, administer, collect and recover income tax. In other words we can also say that this act was made to consolidate and amend rules and laws related to income tax and super tax. This is a citation from Act 43 of 1961, enacted by The Parliament of India. The date of commencement of this act was 1st April 1962 and is still in force.

The Government of India holds meeting to present the finance budget of every year in the month of February. This meeting is held to bring amendments in the income tax act 1961 and the tax slab rates.

Conclusion

The Income Tax laws provide individual taxpayers with methods to save their taxes. The taxpayer can save money by using these income tax saving tools. One of them is tax rebates given under Section 87 A, Income Tax Act 1961. Furthermore, a rebate is a supportive tool which provides with marginally lower payment of taxes by the taxpayers.  

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Narendra Kumar

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