Durgesh Vashisth

Durgesh VashisthRebate of up to Rs. 5,000 for resident individuals having total income of up to Rs. 5,00,000 as per Sec-87A of Income Tax Act, 1961 for A.Y. 2017-18 i.e. F.Y. 2016-17.

The rebate shall be equal to the amount of income tax payable on the total income for assessment year 2017-18 or an amount of Rs. 5,000, whichever is less.

Key Point :-

  • Individual resident of India,
  • Whose Total Income is up to Rs. 5,00,000,
  • Shall be allowed a rebate, From Income Tax,
  • 100% of Income Tax or Rs.5,000, Whichever is Less.

The above points have been represented below showing the manner of Computation:-

87A Computation

Example 1

Compute the tax liability of X Ltd., a domestic company, assuming that the total income of X Ltd. Is Rs. 2,80,000.

Answer

ParticularsRs.
Tax on total income@30% of Rs.2,80,00084,000
Less: Rebate under section 87A*( – )
84,000
Add: Education cess@2%1,640
Secondary and higher education cess@1%840
Total tax liability86,480

*As per section 87A the rebate of Rs. 5,000 is allowed to residential individual.

Example 2

Compute the tax liability of Mr. X, a salaried employee (age: 45 years), assuming that the total income of Rs. 4,80,000. During the previous year ending on March 31, 2017.

Answer

ParticularsRs.
Tax on total income@10% of Rs.2,30,000

(Rs.4,80,000-2,50,000)

23,000
Less: Rebate under section 87A(5,000)
18,000
Add: Education cess@2%360
Secondary and higher education cess@1%180
Total tax liability18,540

 *As per section 87A the rebate shall be equal to the amount of income tax payable or an amount of Rs. 5,000, whichever is less.

Example 3

Compute the tax liability of Mr. X, a salaried employee (age: 45 years), assuming that the total income of Rs. 2,60,000. During the previous year ending on March 31, 2017.

Answer

ParticularsRs.
Tax on total income@10% of Rs.10,0001,000
Less: Rebate under section 87A(1,000)
Add: Education cess@2%Nil
Secondary and higher education cess@1%Nil
Total tax liabilityNil

*As per section 87A the rebate shall be equal to the amount of income tax payable or an amount of Rs. 5,000, whichever is less.

  1. 10000*10% = 1000
  2. 5000

Rebate allowed of Rs.1000.

Example 4

Compute the tax liability of Mr. X (age: 45 years), assuming that the total income of Rs. 5,40,000. During the previous year ending on March 31, 2017.

Answer

ParticularsRs.
Tax on total income@10% of Rs.2,90,00029,000
Less: Rebate under section 87A(- )
29,000
Add: Education cess@2%580
Secondary and higher education cess@1%290
Total tax liability29,870

No Rebate U/s. 87A is allowed as Total Income Exceeds Rs. 5,00,000/-

*As per section 87A the rebate shall be equal to the amount of income tax payable or an amount of Rs. 5,000, whichever is less.

Example 5

Compute the tax liability of Mr. X, a salaried employee (age: 45 years), assuming that his casual income of Rs. 4,80,000. During the previous year ending on March 31, 2017.

Answer

ParticularsRs.
Tax on total income@30% of Rs.4,80,0001,44,000
Less: Rebate under section 87A(5,000)
1,39,000
Add: Education cess@2%2,780
Secondary and higher education cess@1%1,390
Total tax liability1,43,170

*As per section 87A the rebate shall be equal to the amount of income tax payable or an amount of Rs. 5,000, whichever is less.

More Under Income Tax

Posted Under

Category : Income Tax (20867)
Type : Articles (10811)
Tags : SECTION 87A (11) tax deductions (405)
  • nitin wadhawan

    example 4 seems to be incorrect, there should be rebate of 5K, there as well.

  • Durgesh Vashisth

    Dear Nitin Wadhawan,

    As per Section 87A of Income Tax Act, 1961, Rebate of up to Rs. 5,000 is for resident individuals having total income of up to Rs. 5,00,000/-.

    In example 4 the Total Income of Mr. X is exceeding Rs.5,00,000/-, there for he is not eligible for rebate u/s 87A.

    Thanks & Regards
    Durgesh Vashisth
    9899812287

  • CS T KOTAYYA

    Very useful infn indeed in a crystal clear manner even for a lay man .congts.to taxguru and google

Search Posts by Date