Every Resident individuals with Total Income upto 5,00,000 is eligible for Rebate of Rs 12500.

With a view to provide tax relief to the individual tax payers who are in lower income bracket, Government has increase the limit of rebate under section 87A of Income Tax Act, 1961. 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.

Some Important points related to Rebate under section 87A

a) 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.

b) His Total Income after Deductions (under Chapter VIA) doesn’t exceed Rs 5 lakhs for AY 2020-21.

c) 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.

d) This rebate is applied to the total tax before adding the Education Cess (4%)

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.”

Republished with Amendments

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0 Comments

  1. srinivasarangan TS says:

    Sir,

    If my income is with in the prescribed limit to claim the exemption and my tax liability is , for example , Rs.2000/-, under the said rebate will my tax liability become Zero? Please clarify.

    Regards

    Srinivasarangan T S

  2. CA. Subhash Chandra Podder, says:

    Tax credit of Rs 2000/ means enhancement of basic exemption of Rs 2LK. / 2.50 LKs now comes to Rs 2.20 LKs. and 2.70 Lakhs from the assessment year 2014-2015. as per Finance bill 2013 ( 28/02/2013 )for the Income Upto Rs 5Lks.
    example Say ones taxable Income is Rs 2,18,000/and 2,69,000/ ( senior citizen )
    Taxes now to be paid on 2,18,000 is @10% on 18000 (Rs 200,000 basic exemption )= 1800/ ( for the assessment year 2013-2014 ) and for the senior Ctz. Rs 2,69,000/ tax to be paid now assessment year 2013-2014 is on 19,000/ ( 2.69-2.50 Lakhs ) comes to Rs 1,900/ ( being 10% on 19,000/ ) . These benefit will be available form the assessment year 2014-2015 and this amount Upto Rs. 2000/ to be claimed as rebate.
    CA. Subhash Chandra Podder , FCA
    Kolkata

  3. JEEVAN KUMAR says:

    Sir

    Tax Relief of Rs. 2000 for Taxpayer having income upto Rs. 5 Lakh “Income means Before deductions or Taxbale Income )..pl clarify…

  4. Garg Jai Pal says:

    Whether a Senior Citizen will also get benefit of Rs. 2000 as Income tax relief ? Suppose if a Senior Citizen has a taxable income of Rs. Three Lacs, howmuch he has to pay as income tax Rs.3000 or Rs. 5000.

    JAI PAL GARG

  5. Gopathy Padmanabhan says:

    It is a dodgy relief and a sugar coated pill. It is only a “rebate” and old wine in new bottle. Earlier u/s 88 relief was given “upto” Rs.14000, for an investmen of Rs.70,000. Now as you mentioned, the rebate shall be equal to the amount of income-tax payable on the total income for “any assessment year” or an amount of two thousand rupees, whichever is less. Consequently any individual having income up to Rs 2,20,000 will not be required to pay any tax and every individual having total income above Rs. 2,20,000/- but not exceeding Rs. 5,00,000/- shall get a tax relief of Rs. 2000/-.

    What is meant by “any assessment year”? Is it going to be there in the statute books permanently? What guarantee is there that it will not disappear like section 88 ?

    The rebate shall be equal to the amount of income-tax payable on the total income for any assessment year or an amount of two thousand rupees, whichever is less. Then how did the FM give the calculation of 1.80 crore assessees and Rs.36000 crore rebate? Is he so weak in mathematics,though we all know that he is weak in reasoning?

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