• Mar
  • 02
  • 2013

Section 87A Income Tax Credit/Rebate of Rs. 2,000 – FAQ

Frequently Asked Questions (FAQ’s)

Q1. Whether basic exemption limit for Individuals, HUF’s, AOP & BOI under the Income Tax Act, 1961 has been raised from Rs. 2,00,000/- to Rs. 2,20,000/-

Ans. NO, the basic exemption limit remains unchanged at Rs. 2 Lakh for FY 2013-14 (AY 2014-15).

Q2. In the Budget 2013 Speech, The Finance Minister had said,

“Nevertheless, I am inclined to give some relief to the tax payers in the first bracket of Rs. 2 Lakh to Rs. 5 Lakh. Assuming an inflation rate of 10% and a notional rise in the threshold exemption from Rs. 2,00,000/- to Rs. 2,20,000/- I propose to provide a tax credit of Rs. 2,000/- to every person who has a total income upto Rs. 5 Lakh. 1.8 crore tax payers are expected to benefit to the value of Rs. 3,600 crore.”

So doesn’t it mean that the exemption has been raised by Rs. 20,000 and tax relief of Rs. 2,000/- given to every person?

Ans. No, it doesn’t mean that!!!

Q3. So what is the point? Many people are saying that the exemption has been raised by Rs. 20,000/-. I am confused!

Ans. It means that though threshold exemption remains unchanged, tax benefit of upto Rs. 2,000/- is given.

Q4. How that is made possible?

Ans. This has been made possible by inserting a new section 87A in the Income Tax Act, 1961 which allows REBATE of upto Rs. 2,000/- from the income tax payable.

5. Whether there is any condition for availing this benefit?

Ans. Yes, this benefit is available only if the income doesn’t exceed Rs. 5 Lakh.

Q6. Say my income is Rs. 5,50,000/- and I have paid Life Insurance premium of Rs. 50,000/-. Will I be eligible to claim the rebate?

Ans. Yes, because the ‘Total Income’ after deducting all the deductions available under Chapter VI from the ‘Gross Total Income’ shall not exceed Rs. 5 Lakh.

Q7. That’s great!! I am filing IT returns for myself and as Karta of HUF, so I can take total benefit of Rs. 4,000/-.

Ans. No, this rebate is available ONLY to an ‘INDIVIDUAL’ tax payer, resident in India.

Q8. But in the Budget Speech, as quoted above, the FM used the words ‘I propose to provide a tax credit of Rs. 2,000/- to every person..’ and person also includes a HUF?

Ans. The words used in the budget speech are for general understanding and have no statutory implications. As per new section 87A, “An assessee, being an individual resident in India, whose total income does not exceed five hundred thousand rupees, shall be entitled to a deduction, from the amount of income-tax (as computed before allowing the deductions under this Chapter) on his total income with which he is chargeable for any assessment year, of an amount equal to hundred per cent of such income-tax or an amount of two thousand rupees, whichever is less.”

9. Ohhh… but is it available to both Male and Female assesses?

Ans. Yes.

Q10. How will this benefit a senior citizen (age 60 or above) because the exemption limit in his case is already Rs. 2,50,000/- i.e. in excess of Rs. 2,20,000/-?

Ans. Tax Rebate of Rs. 2,000/- is also available to a senior citizen, if the total income is Rs. 5 Lakh or less. Effectively, it means, a senior citizen, both male and female, need not  pay any tax on total income of upto Rs. 2,70,000/-. However, this benefit is not available to a super senior citizen (age 80 or above) as his total income upto Rs. 5 Lakh is already fully exempted.

11. The rebate of Rs. 2000/- is available from which year?

Ans. The new section has been inserted with effect from the 1stday of April, 2014 means it is applicable for Assessment Year 2014-15 and thereafter. In simple words, when you will be filing your income tax return for the Financial Year 2013-14, you will get rebate of upto Rs. 2000/-

12. Ok… Can we say that a new type of deduction has been provided for individuals?

Ans. A ‘deduction’ is given under Chapter VI from the gross total income, but this is a ‘rebate’ under Paragraph A of Chapter VIII of the Income Tax Act, 1961 which is deducted from the income-tax payable.

Note: Anyone shall not use this article for commercial purposes, without the permission of author.

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Manoj AgarwalAuthor    : Manoj Agarwal

Address  : Ganpati Campus, Lal Building Road, Rourkela – 769012

Contact   : +91-9937041788

E:mail      : ServiceTaxExpert@yahoo.com

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32 Responses to “Section 87A Income Tax Credit/Rebate of Rs. 2,000 – FAQ”

  1. Hemant K Sardar says:

    Whether this rebate is also available in the AY-2015-16

  2. Manoj Agarwal says:

    Dear All, I am getting a lot of queries that Whether the rebate of upto Rs. 2000 is continued and available in the current FY 2014-15 (AY 2015-16)? Yes, the rebate u/s 87A continues as the Finance (No. 2) Bill, 2014 has not proposed any change in section 87A. Cheers!!!

  3. Manoj Agarwal says:

    @ Hariprasad Yes Rebate is available because Total Income is 495000. Agricultural Income is considered only for Rate purposes.

  4. hariprasad says:

    sir
    if the income of assessee is rs 520000 (including 25000 as agriculturaal income whether elegible for exemption u/s 87 A

  5. Manoj Agarwal says:

    @ Debajit Yes you will get rebate of Rs. 2000.
    @ Jaspal Singh If your salary is upto Rs. 5,91,000 then no need to increase saving under chapter VI to get rebate of Rs. 2,000/-. The rule is after deducting your eligible savings under chapter VI, the income should be less than 5 lacs.

  6. debajit das says:

    i want to know whether rebate of Rs.2000 will applicable for this year income tax computation 2013-14.My gross salary is 412000 and the taxable income is Rs.112000.Can i get tax benifit of Rs.2000 U/S 87A.please clearify me.

  7. Jaspal Singh says:

    Dear Sir / Madam
    I am a govt employee and my salary income is more than 5 lakh and savings are 91000/– (ninety one thousand only) am I eligible for Rs 2000/- tax rebate or I have to increase savings upto Rs. 1,00,000/- ( Rs one lakh).

    Regards

  8. rajendra says:

    I hv gross income of 620000rs.I hv saved 125000 rs.so my taxable income is. 495000.May i take be benefits of 87 a

  9. sushil kumar mishra says:

    Sir/Madam,
    Whether the benefit of rs 2000/- u/s 87A is for those whose gross salary income is below 5,00,000
    or whose taxable income is below 5,00,000

  10. Manoj Agarwal says:

    @ Raghuram and Milind. Kindly refer to Q.7 where i have already explained that the rebate is allowed if total income after making deduction under Chapter VI i.e. your taxable income after deducting your contribution/investment u/s 80C, 80CCC, 80D, 80DD, 80E, etc. doesn’t exceed Rs. 5 Lacs.

  11. Raghuram says:

    Sir/Madam,
    Whether the benefit of rs 2000/- u/s 87A is for those whose gross salary income is below 5,00,000
    or whose taxable income is below 5,00,000

  12. milind teli says:

    the benefit of rs 2000/- is for those whose gross salary income is below 5,00,000
    or whose taxable income is below 5,00,000

  13. mohn das says:

    the deduction u/s 87 A will be taken before adding edn cess or after

  14. rakesh says:

    Dear Sir

    My father took an agriculture loan which has used by me on my education i am paying that loan still. can i claim under section 80 E or u/s 10 (interest on bank loan)

    How much should i invest to save tax of Amt Rs 4911

    Can i get back tax paid till current month if i submit proof of investment.

  15. kishor says:

    thanks for information

  16. sheetal says:

    Dear Sir/ Madam,
    I am working as an Accountant in a school in Pune. I wanted to calculate Tax payble on salary of employees for 2013-14 for deduction of TDS. This year Income Tax Dept. allowed Rebate Rs.2000/- from tax amt. whoes income is less than Rs. 5 Lac.
    I have 1 doubt regarding this. How we should take investment amount from employees? Including rebate or exluding rebate?
    suppose taxable income of 1 employee is Rs. 250000. Then Taxable amount is Rs 50,000. and tax will be 3090. Then how much he should invest to get nil tax Rs. 50000 or Rs. 31000?

  17. Manoj Agarwal says:

    @ Deepak Soni… well said. Though budget speech is for the general public, still the FM should had carefully selected his words

  18. DEEPAK SONI says:

    The law has been very well explained.It worth noting that how the present FM is making a misleading budget speech.He knows the difference between a person and an individual very well and nonetheless he is using the word person in the budget speech.

  19. Dashang Shah says:

    Respected sir,
    section 87A applicable in case of without pan employee?

  20. Manoj Agarwal says:

    @ tinku ahuja In my view, the rebate will be available after set-off of losses as the Total Income is finally not exceeding Rs. 5 Lacs.

    Also, while calculating and deducting TDS from Salary of Individuals, the employer should consider and allow rebate of Rs. 2000 U/s 87A to the employees whose total income is Rs. 5 Lakh or less.

  21. Rishi R says:

    Dear Manoj,

    Last month i paid a tax of Rs.1000.So does it mean i wont have to pay any tax from March 2013?

  22. Tinku Ahuja says:

    Whether the rebate will be considered after providing set-off of losses…for e.g. as if one has an gross salary of 8.50 lacs and has an loss from HP of 2.60 lacs (if let out)and deduction of say 1.20 lacs under chapter VI, then whether 4.70 lacs can be considered for rebate of Rs.2K as then it will be below 5 lacs

  23. ISHER KUMAR ARORA says:

    DEAR SIR,

    MANY MANY THANKS FOR PROVIDING DETAILED INFORMATION. ALL DOUBTS ARE NOW CLEAR.

    REGARDS

  24. Srikant Agarwal says:

    Very simple and informative. Very good

  25. tarsem choudhary says:

    dear sir

    i’m really very impressed the way you have explained it, it will help everyone

    thanks

  26. tanush says:

    Thanx Sir , u made it clear

  27. tanush says:

    thanx sir……… u made it clear!

  28. Manoj Agarwal says:

    Q13. Whether this rebate is also available to Non Resident?
    Ans: No, Rebate under section 87A is not available to non resident persons. It is available only to resident of India subject to above conditions stated above. (Note this question and answer has been contributed by the Admin of simpletaxindia.net)

    Q14. If the Total Income is say; Rs. 2,15,000/-, Income tax computes to Rs. 1500/- and Rebate of Rs. 2000/- allowed. Does it mean refund of balance Rs. 500 is available?
    Ans. No refund is available because rebate is restricted to the amount of income tax payable.

    Q15. Whether Return is required to be filed when the Total Income is upto Rs. 2,20,000/- and after rebate, no tax is payable.
    Ans. Yes, Income Tax Return is required to be filed as usual, if the total income exceeds the basic exemption limit of Rs. 2 Lakh.

  29. Dharmender Jha says:

    Thakns a lot. It works really very good.

  30. Gnanika says:

    Well explained.

  31. suresh says:

    well information,,,,,,,,,,,,,,

  32. srinivasulu says:

    dear Mr.Manoj,

    Thank you for providing detailed explanation. It is really user friendly and excellent and understandable for a lay men also

    Once again thank you very much

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