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.

Extract of 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.”

Some Important points related to Rebate under section 87A

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%)

Example for better understanding:

F.Y. 2019 – 2020 (A.Y. 2020 – 2021)

Total Income Tax payable before cess Rebate u/s 87A Tax Payable + 4% Cess
2,70,000  1000  1000 0
3,00,000 2,500 2,500 0
4,90,000 12,000 12,000 0
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

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0 Comments

  1. VUM Rao says:

    I am a senior citizen. I earn Rs. 5, 60,000/- after deducting TDS. Is filing income tax return is compulsiory? In case I choose to file IT return, can I deduct expenditure like office rent, staff salary etc. Please help me with your detailed advice.

    Thanks in advance

  2. Nitin Tiwari says:

    I have not filled my IT return since 2010-11 , I was working in Qatar for 7 months and returned, after 1 year I joined an MNC at my home city but salary was not taxable.
    How can I fill ITR for previous years.
    Please guide.

  3. Jayarajan D Nair says:

    Sir, Can I quote the rebate of Rs.2000/- under section 87A while preparing the income details for the financial year 2014-15(AY – 2015-16). Please help.

  4. 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!!!

    1. Manoj Agarwal says:

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

  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. 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

  9. 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

    1. 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.

  10. 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.

  11. 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?

  12. 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.

    1. Manoj Agarwal says:

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

  13. 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.

  14. 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

  15. 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.

  16. 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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