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Trusted by 1L+ Indians
Want to Achieve any of the below Goals upto 80% faster?
Dream Home
Dream Wedding
Dream Car
Retirement
1st Crore
Dream Home
Dream Wedding
Dream Car
Retirement
1st Crore
Trusted by 3 Crore+ Indians
Want to Achieve any of the below
Goals upto 80% faster?
Dream Home
Dream Wedding
Dream Car
Retirement
1st Crore
Trusted by 3 Crore+ Indians
Want to Achieve any of the below
Goals upto 80% faster?
Dream Home
Dream Wedding
Dream Car
Retirement
1st Crore
Trusted by 3 Crore+ Indians
Want to Achieve any of the below Goals upto 80% faster?
Dream Home
Dream Wedding
Dream Car
Retirement
1st Crore
Trusted by 3 Crore+ Indians
Want to Achieve any of the below Goals upto 80% faster?
Dream Home
Dream Wedding
Dream Car
Retirement
1st Crore
Claiming a Tax Rebate Under Section 87A
Claiming a Tax Rebate Under Section 87A
Introduction
Reducing your tax liability can be a daunting task, especially after considering various deductions. However, if you’re seeking additional relief, the tax rebate under Section 87A could be the solution you need. This rebate is designed to lessen your tax payable amount, offering significant benefits depending on your total income and the applicable tax regime. In this guide, we’ll delve into the details of claiming a rebate under Section 87A, including eligibility criteria, how to claim, and the rebate limits for various financial years.
Steps to Claim a Tax Rebate Under Section 87A
Calculate Your Gross Total Income: Start by determining your gross total income for the relevant financial year. This includes all sources of income before any deductions.
Apply Tax Deductions: Subtract allowable tax deductions from your gross income. These deductions could be from investments, savings, or any other eligible tax-saving avenues under various sections of the Income Tax Act.
Determine Your Total Income: After applying all tax deductions, calculate your total income. This figure will be used to assess your eligibility for the rebate.
Declare Income and Deductions in Your Income Tax Return (ITR): Accurately declare both your gross income and the deductions claimed in your ITR.
Claim the Rebate: If your total income does not exceed the specified limits (Rs 7 lakh for the new tax regime and Rs 5 lakh for the old tax regime for FY 2023-24), you can claim the rebate under Section 87A.
Understand the Maximum Rebate: For the Assessment Year (AY) 2024-25, the maximum rebate under the new tax regime is Rs 25,000, while under the old tax regime, it is Rs 12,500.
Example Calculation for FY 2023-24
Let’s illustrate how the rebate works with an example. Suppose Mr. Ravi, aged 36, has a total income of Rs 7,15,000, which includes his salary and interest on bank fixed deposits. Here’s how his tax liability and rebate are calculated under the new tax regime:
Calculate Excess Income Above Rs 7 Lakh: Mr. Ravi’s total income exceeds Rs 7 lakh by Rs 15,000 (Rs 7,15,000 - Rs 7,00,000).
Compute Income Tax Liability:
Tax on the first Rs 3,00,000 is Nil.
Tax on the next Rs 3,00,000 is Rs 15,000 (5% of Rs 3 lakh).
Tax on the remaining Rs 1,15,000 is Rs 11,500 (10% of Rs 1,15,000).
Total tax liability before rebate is Rs 26,500 (Rs 15,000 + Rs 11,500).
Apply Rebate: Since the taxable income is above Rs 7 lakh, the rebate under Section 87A is the difference between the total tax and the tax on income up to Rs 7 lakh. Thus, the rebate would be Rs 15,000 (Rs 26,500 - Rs 11,500).
Calculate Final Tax Payable: Mr. Ravi’s final tax payable after applying the rebate and adding a 4% health and education cess on the remaining amount is Rs 15,600 (Rs 15,000 + Rs 600).
Eligibility for Rebate Under Section 87A
For FY 2022-23
To qualify for a rebate under Section 87A for FY 2022-23:
Residency Status: You must be a resident individual.
Income Criteria: Your total income, after accounting for deductions under Chapter VI-A (such as Sections 80C, 80D, etc.), should not exceed Rs 5 lakh.
Rebate Cap: The maximum rebate is Rs 12,500. If your total tax payable is less than this amount, your tax liability will be nullified.
For FY 2018-19 and FY 2017-18
The eligibility criteria for claiming the rebate in FY 2018-19 and FY 2017-18 were:
Residency Status: You must be a resident individual.
Income Criteria: Your total income, after deductions under Chapter VI-A, should be less than Rs 3.5 lakh.
Rebate Cap: The maximum rebate allowed was Rs 2,500. If your tax payable was less than this amount, you would not have to pay any tax.
Rebate Limit Under Section 87A for Various Financial Years
Financial Year 2023-24:
New Tax Regime: Rs 7,00,000 with a rebate limit of Rs 25,000.
Old Tax Regime: Rs 5,00,000 with a rebate limit of Rs 12,500.
Financial Year 2022-23:
Old and New Regimes: Rs 5,00,000 with a rebate limit of Rs 12,500.
Financial Years 2021-22, 2020-21, 2019-20:
Old Regime: Rs 5,00,000 with a rebate limit of Rs 12,500.
Financial Year 2018-19:
Old Regime: Rs 3,50,000 with a rebate limit of Rs 2,500.
Financial Year 2017-18:
Old Regime: Rs 3,50,000 with a rebate limit of Rs 2,500.
Frequently Asked Questions
Can the rebate be claimed if my total income exceeds the limit?
No, the rebate under Section 87A can only be claimed if your total income falls within the specified limits for the respective financial year.
Is the rebate applicable under both tax regimes?
Yes, Section 87A provides rebates under both the old and new tax regimes, but the eligibility criteria and rebate limits vary.
Does the rebate apply before or after applying the health and education cess?
The rebate is applied to the total tax before adding the health and education cess.
Can I claim Section 87A rebate on long-term capital gains?
No, Section 87A rebate cannot be adjusted against tax on long-term capital gains on equity shares and equity-oriented mutual funds.
Quick Summary
Section 87A provides a valuable opportunity for taxpayers to reduce their tax liability. By understanding the eligibility criteria, rebate limits, and the calculation process, you can effectively manage your tax obligations and potentially lower your tax payable amount significantly. Always ensure to check the latest updates and guidelines applicable for each financial year to make the most of this rebate.
For a seamless tax filing experience and to stay updated with the latest tax regulations, consider using reliable tax filing services like ClearTax.
Conclusion
Claiming a tax rebate under Section 87A can simplify your tax planning and provide substantial financial relief. By following the outlined steps and ensuring you meet the eligibility criteria, you can effectively reduce your tax burden and enjoy a smoother tax filing process.
Introduction
Reducing your tax liability can be a daunting task, especially after considering various deductions. However, if you’re seeking additional relief, the tax rebate under Section 87A could be the solution you need. This rebate is designed to lessen your tax payable amount, offering significant benefits depending on your total income and the applicable tax regime. In this guide, we’ll delve into the details of claiming a rebate under Section 87A, including eligibility criteria, how to claim, and the rebate limits for various financial years.
Steps to Claim a Tax Rebate Under Section 87A
Calculate Your Gross Total Income: Start by determining your gross total income for the relevant financial year. This includes all sources of income before any deductions.
Apply Tax Deductions: Subtract allowable tax deductions from your gross income. These deductions could be from investments, savings, or any other eligible tax-saving avenues under various sections of the Income Tax Act.
Determine Your Total Income: After applying all tax deductions, calculate your total income. This figure will be used to assess your eligibility for the rebate.
Declare Income and Deductions in Your Income Tax Return (ITR): Accurately declare both your gross income and the deductions claimed in your ITR.
Claim the Rebate: If your total income does not exceed the specified limits (Rs 7 lakh for the new tax regime and Rs 5 lakh for the old tax regime for FY 2023-24), you can claim the rebate under Section 87A.
Understand the Maximum Rebate: For the Assessment Year (AY) 2024-25, the maximum rebate under the new tax regime is Rs 25,000, while under the old tax regime, it is Rs 12,500.
Example Calculation for FY 2023-24
Let’s illustrate how the rebate works with an example. Suppose Mr. Ravi, aged 36, has a total income of Rs 7,15,000, which includes his salary and interest on bank fixed deposits. Here’s how his tax liability and rebate are calculated under the new tax regime:
Calculate Excess Income Above Rs 7 Lakh: Mr. Ravi’s total income exceeds Rs 7 lakh by Rs 15,000 (Rs 7,15,000 - Rs 7,00,000).
Compute Income Tax Liability:
Tax on the first Rs 3,00,000 is Nil.
Tax on the next Rs 3,00,000 is Rs 15,000 (5% of Rs 3 lakh).
Tax on the remaining Rs 1,15,000 is Rs 11,500 (10% of Rs 1,15,000).
Total tax liability before rebate is Rs 26,500 (Rs 15,000 + Rs 11,500).
Apply Rebate: Since the taxable income is above Rs 7 lakh, the rebate under Section 87A is the difference between the total tax and the tax on income up to Rs 7 lakh. Thus, the rebate would be Rs 15,000 (Rs 26,500 - Rs 11,500).
Calculate Final Tax Payable: Mr. Ravi’s final tax payable after applying the rebate and adding a 4% health and education cess on the remaining amount is Rs 15,600 (Rs 15,000 + Rs 600).
Eligibility for Rebate Under Section 87A
For FY 2022-23
To qualify for a rebate under Section 87A for FY 2022-23:
Residency Status: You must be a resident individual.
Income Criteria: Your total income, after accounting for deductions under Chapter VI-A (such as Sections 80C, 80D, etc.), should not exceed Rs 5 lakh.
Rebate Cap: The maximum rebate is Rs 12,500. If your total tax payable is less than this amount, your tax liability will be nullified.
For FY 2018-19 and FY 2017-18
The eligibility criteria for claiming the rebate in FY 2018-19 and FY 2017-18 were:
Residency Status: You must be a resident individual.
Income Criteria: Your total income, after deductions under Chapter VI-A, should be less than Rs 3.5 lakh.
Rebate Cap: The maximum rebate allowed was Rs 2,500. If your tax payable was less than this amount, you would not have to pay any tax.
Rebate Limit Under Section 87A for Various Financial Years
Financial Year 2023-24:
New Tax Regime: Rs 7,00,000 with a rebate limit of Rs 25,000.
Old Tax Regime: Rs 5,00,000 with a rebate limit of Rs 12,500.
Financial Year 2022-23:
Old and New Regimes: Rs 5,00,000 with a rebate limit of Rs 12,500.
Financial Years 2021-22, 2020-21, 2019-20:
Old Regime: Rs 5,00,000 with a rebate limit of Rs 12,500.
Financial Year 2018-19:
Old Regime: Rs 3,50,000 with a rebate limit of Rs 2,500.
Financial Year 2017-18:
Old Regime: Rs 3,50,000 with a rebate limit of Rs 2,500.
Frequently Asked Questions
Can the rebate be claimed if my total income exceeds the limit?
No, the rebate under Section 87A can only be claimed if your total income falls within the specified limits for the respective financial year.
Is the rebate applicable under both tax regimes?
Yes, Section 87A provides rebates under both the old and new tax regimes, but the eligibility criteria and rebate limits vary.
Does the rebate apply before or after applying the health and education cess?
The rebate is applied to the total tax before adding the health and education cess.
Can I claim Section 87A rebate on long-term capital gains?
No, Section 87A rebate cannot be adjusted against tax on long-term capital gains on equity shares and equity-oriented mutual funds.
Quick Summary
Section 87A provides a valuable opportunity for taxpayers to reduce their tax liability. By understanding the eligibility criteria, rebate limits, and the calculation process, you can effectively manage your tax obligations and potentially lower your tax payable amount significantly. Always ensure to check the latest updates and guidelines applicable for each financial year to make the most of this rebate.
For a seamless tax filing experience and to stay updated with the latest tax regulations, consider using reliable tax filing services like ClearTax.
Conclusion
Claiming a tax rebate under Section 87A can simplify your tax planning and provide substantial financial relief. By following the outlined steps and ensuring you meet the eligibility criteria, you can effectively reduce your tax burden and enjoy a smoother tax filing process.
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