Tax Rebate Under Section 87A

The primary responsibility of any government is to safeguard the citizens of its nation and the Indian government is constantly working to achieve this goal. To help the government to fulfill this dream smoothly, the citizens of India are required to pay taxes as per their income. The taxes help the government to build the infrastructure of the nation. However, Indian tax law also offers many provisions to reduce tax liabilities, and Section 87A of the Income Tax Act, 1961 is one of those provisions.

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The income tax rebate provided in Section 87A is offered for people who have a salary below the pre-defined limit. Basically, this act is there to bring down the tax burden for lower salary bracket people.

Section 87A – Income Tax Rebate

The income tax rebate under Section 87A offers some relief to the taxpayers who fall under the tax slab of 10%. Any individual whose annual net income is not more than Rs.5 Lakh is eligible to a claim tax rebate under Section 87A of the Income Tax Act, 1961. This means an individual can get a rebate on the tax of up to Rs. 2,000. In this way, the deduction will be Rs. 2,000 or 100% of the salary of an individual, whichever is smaller.

The income tax rebate in Section 87A is offered only to individuals and not the people of Hindu Undivided Families, BOI/ AOP, Company, or Firm. Moreover, the total rebate amount should not be more than the amount of the income tax calculated before the deduction on the total income of the person with whom they will be charged for the assessment year.

Section 87A – Points to Remember

Mentioned below are the points to remember for Section 87A:

  • Section 87A is added to the Income Tax Act, 1961 for the betterment and is applicable from the 1st of April of the financial year. This act is applied to a tax assessment year and its subsequent tax assessment years.

  • The non-residential Indians are not eligible to get the benefits of this tax rebate. Indian residents only are eligible to avail of this tax deduction benefit.

  • Both female and male assessee can get the benefits of this tax rebate.

  • Super senior citizens (above 80 years of age) are not eligible to get a tax rebate under Section 87A.

  • Section 87A of the Income Tax Act also restricts the tax rebate to the total tax that is payable, if it is less than Rs. 2,000.

Section 87A – Claim Process

An individual whose annual income is less than Rs.5 Lakh and their tax liability is greater than Rs. 2,000 is eligible to claim the income tax rebate under Section 87A. This can be done at the time of income tax return filing and immediately after adding higher and secondary education cess, or education cess. Following step-wise process needs to be followed to claim the tax rebates under Section 87A:

  • The taxpayer needs to know the Gross Total Income of the financial year 2020 – 2021

  • Subtract the tax deductions available for investments, tax savings, etc.

  • The Total Income will be computed after subtracting the deductions

  • Taxpayer needs to declare their Gross income as well as Deductions while filing the ITR (Income Tax Return)

  • After the ITR, the individual can claim a tax rebate under Section 87A

  • The maximum tax rebate offered under Section 87A is Rs. 12,500. (For Assessment year 2021 – 2022)

  • It is important to know that the total income shall not exceed Rs. 5 lakhs if Section 87A rebates are to be claimed

Rebate Calculation

Here is an example of a rebate calculation under Section 87A for individuals below 60 years of age.

(FY 2020-21) Income Source Income (Rs)
Gross Total Income 6,50,000
Less: Section 80C deductions 1,50,000
Total Income 5,00,000
Income-tax (@5% from Rs 2.5 to 5 lakh) 12,500
Less: Section 87A rebates 12,500
Tax payable Nil

Eligibility Criteria to Claim Income Tax Rebate under Section 87A for Financial Year 2020 – 21 (The assessment Year 2021 – 22)

One can claim a tax rebate under Section 87A of the Income Tax Act if they meet with the following conditions:

  • One must be a resident individual.

  • The total income of an individual minus the Deductions (under Section 80) must be equal to or less than Rs.5 Lakhs.

  • The income tax rebate can be up to Rs. 12,500. In this way, if an individual is paying an income tax lower than Rs. 12,500, then the amount gets the rebate under Section 87A. This income tax rebate is applied to the total tax before adding the Cess on Education (4%).

Mentioned below are some examples of the rebate allowed under Section 87A to the individuals who are residents and to Senior Citizens for Financial Year 2020 - 2021:

Total Annual Income (Rs.) Rebate Under Section 87A Tax Payable before Cess Tax Payable +4% Cess
Rs. 2,70,000 Rs. 1,000 1, 000 0
Rs. 3,60,000 Rs. 3,000 3, 000 0
Rs. 4,90,000 Rs. 12,000 Rs. 12,000 0
Rs. 12,00,000 0 Rs. 1,72,500 Rs. 1,79,400

Eligibility to Claim Rebate Under Section 87A for Financial Year 2018 – 2019 And 2017 – 2018

Eligibility criteria to claim deductions for FYs 2018 – 2019 and 2017 – 2018 are:

  • Taxpayer is an Indian resident

  • Total income after deductions under Chapter VI-A is less than Rs. 3.5 lakhs (under Section 80C of the IT Act)

  • Tax rebate limit up to Rs. 2,500

Mentioned below are some examples of the rebate allowed under Section 87A to the individuals who are residents and to Senior Citizens for Financial Year 2017 – 2018 and 2018 – 2019:

Total Annual Income (Rs.) Tax Payable before Cess Rebate Under Section 87A Tax Payable +4% Cess
Rs. 2,65,000 Rs. 750 Rs. 750 0
Rs. 2,70,000 Rs. 1,000 Rs. 1,000 0
Rs. 3,00,000 Rs. 2,500 Rs. 2,500 0
Rs. 3,50,000 Rs. 5,000 Rs. 2,500 Rs. 2,500 + cess**

** Tax payable for FY  2017 – 2018 is Rs. 2,575 (2,500 + 3% cess)

** Tax payable for FY 2018 – 2019 is Rs. 2,600 (2,500 + 4% cess)

Rebate Limit Under Section 87A for Previous Financial Years

Financial Year Total Income Taxable Limit  Rebate under Section 87A
2021 - 2022 Rs. 5,00,000 Rs. 12,500
2020 - 2021 Rs. 5,00,000 Rs. 12,500
2019 - 2020 Rs. 5,00,000 Rs. 12,500
2018 - 2019 Rs. 3,50,000 Rs. 2,500
2017 - 2018 Rs. 3,50,000 Rs. 2,500
2016 - 2017 Rs. 5,00,000 Rs. 5,000
2015 - 2016 Rs. 5,00,000 Rs. 2,000
2014 - 2015 Rs. 5,00,000 Rs. 2,000
2013 - 2014 Rs. 5,00,000 Rs. 2,000

Section 87A - Frequently Asked Questions

  • Can non-residential Indians avail the tax deduction benefit provided under Section 87A of the Income Tax Act, 1961?

    Answer: No, only Indian residents are eligible to avail of the tax rebate offered under Section 87A.
  • Define total income?

    Answer: The total income of an individual is per head total income that includes the salary of an individual, their income from property/house, income from profession & business, capital gains income, income from different other sources.
  • Are senior citizens eligible to get a tax rebate under Section 87A?

    Answer: Yes, the senior citizens are eligible to avail of tax rebate under Section 87A. However, those who are 60 years old but are less than 80 years can get this benefit.
  • Can this income tax rebate be claimed by any person?

    Answer: The income tax rebate offered under Section 87A can be availed by an individual who is an Indian resident. The companies and Hindu Undivided Families (HUFs) cannot avail themselves of its benefits.
  • Please mention the rebates allowed in previous years?

    Answer: A table of allowed rebates is given below:
    Financial Year Total Income Taxable Limit  Rebate under Section 87A
    2021 - 2022 Rs. 5,00,000 Rs. 12,500
    2020 - 2021 Rs. 5,00,000 Rs. 12,500
    2019 - 2020 Rs. 5,00,000 Rs. 12,500
    2018 - 2019 Rs. 3,50,000 Rs. 2,500
    2017 - 2018 Rs. 3,50,000 Rs. 2,500
    2016 - 2017 Rs. 5,00,000 Rs. 5,000
    2015 - 2016 Rs. 5,00,000 Rs. 2,000
    2014 - 2015 Rs. 5,00,000 Rs. 2,000
    2013 - 2014 Rs. 5,00,000 Rs. 2,000
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