As we all aware that, section 87A is considered as one of the most important section. Since the rebate is very important to reduce the tax Burdon of assessee. But in industry there is always a confusion or doubt faced by professionals on availing the rebate. Hence today I am coverig this topic with in depth discussion on Section 87A of Income tax Act, 1961.
“An assessee being an individual resident in India, whose total Income does not exceed Rupees Five Lakhs, shall be entitled to a deduction, from the amount of income tax (as computed before allowing 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 Rs. Twelve thousand five hundred, whichever is less.”
1. Assessee must be a Resident Individual
Note: Please note that non resident are not eligible for tax rebate and this rebate is only available to Individual assesses only.
2. His Total Income after Deductions (under Chapter VIA) doesn’t exceed Rs 5 lakhs for AY 2020-21.
3. The rebate is limited to Rs 12,500 for AY 2020-21 respectively. This means that if the total tax payable is lower than prescribed limit, then that amount will be the rebate under section 87A.
4. This rebate is applied to the total tax before adding the Education Cess (4%)
|Total Income||Tax payable before cess||Rebate u/s 87A||Tax Payable + 4% Cess|
|10,00,000||1,12,500||0||1,12,500 +4,500 = 1,17,000|
Note: Anyone shall not use this article for commercial purposes, without the permission of author.
Republished with Amendments