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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
Income Tax Rebate Under Section 87A
Income Tax Rebate Under Section 87A
Are you looking for ways to minimize your tax liability even after taking advantage of deductions? The rebate under Section 87A might just be the relief you need. This detailed guide will help you understand how this rebate works and how it can reduce your tax burden.
Introduction to the Rebate Under Section 87A
The rebate under Section 87A is a valuable provision introduced to ease the tax liability for individuals with income within specified limits. For the financial year (FY) 2023-24, this rebate is designed to benefit taxpayers by lowering their tax payable amount. If your total income, after accounting for Chapter VIA deductions, does not exceed Rs 5 lakh under the old tax regime, or Rs 7 lakh under the new tax regime, you are eligible for this rebate. By claiming this rebate, your income tax liability could potentially become nil.
Rebate Under Section 87A for FY 2023-24
For the financial year 2023-24 (Assessment Year 2024-25), the rebate provisions under Section 87A have remained consistent in terms of amount. However, due to changes in the slab rates in the new tax regime, the threshold for eligibility has been updated. Under the old tax regime, individuals with a taxable income of up to Rs 5 lakh are eligible for the rebate. Conversely, under the new tax regime, individuals with a taxable income of up to Rs 7 lakh can avail themselves of this benefit.
How Much Rebate is Allowed Under Section 87A?
If your total taxable income is up to Rs 7 lakh and you choose to follow the new tax regime, you are entitled to a rebate that is the lower of the following amounts:
The total income tax payable on your total income, or
An amount up to Rs 25,000.
For those opting to stay under the old tax regime with a total taxable income of less than Rs 5 lakh, the rebate is the lower of:
The total income tax payable on your total income, or
An amount up to Rs 12,500.
Additionally, under the new tax regime, if your income exceeds Rs 7 lakh and the tax payable on the income over Rs 7 lakh exceeds Rs 7 lakh, the tax will be limited to the extent of the income exceeding Rs 7 lakh.
Here’s a step-by-step breakdown to understand this better:
Example Calculation:
Mr. Ravi, aged 36 years, and a resident of India, has a total income of Rs 7,15,000, which includes his salary and interest from a fixed deposit. Let’s calculate his tax liability for the Assessment Year 2024-25 under the new tax regime.
Calculate the excess income above Rs 7 lakh:
Total income – Rs 7 lakh = Rs 7,15,000 – Rs 7,00,000 = Rs 15,000.
Compute the income-tax liability on the total income:
Tax on the first Rs 3,00,000: Nil.
Tax on the next Rs 3,00,000 @ 5%: Rs 15,000.
Tax on the remaining Rs 1,15,000 @ 10%: Rs 11,500.
Total tax on Rs 7,15,000 = Rs 15,000 + Rs 11,500 = Rs 26,500.
Rebate Calculation:
Since the tax liability (Rs 26,500) is greater than the excess income (Rs 15,000), the rebate under Section 87A would be Rs 15,000 (Rs 26,500 – Rs 11,500).
Therefore, Mr. Ravi's tax payable, considering the rebate, is Rs 11,500 (tax on total income) plus a health & education cess of 4% on Rs 15,000, amounting to Rs 600.
Total Tax Liability: Rs 12,100 (Rs 11,500 + Rs 600).
Steps to Claim a Tax Rebate Under Section 87A
Calculate your gross total income for the financial year.
Apply deductions for tax savings, investments, etc., to arrive at your total income.
Declare your gross income and tax deductions in your Income Tax Return (ITR).
Claim the tax rebate under Section 87A if your total income does not exceed Rs 7 lakh under the new tax regime or Rs 5 lakh under the old tax regime.
The maximum rebate under Section 87A for the Assessment Year 2024-25 is Rs 25,000 under the new tax regime and Rs 12,500 under the old tax regime.
Illustrative Examples for Rebate Calculation:
Under the New Tax Regime for Individuals Below 60 Years:
Gross Total Income: Rs 6,00,000
Deductions under Section 80C: NA
Total Income: Rs 6,00,000
Income Tax (5% on Rs 3 lakh to Rs 6 lakh): Rs 15,000
Less: Rebate under Section 87A: Rs 15,000
Tax Payable: Nil
Note: Deduction under Section 80C is not applicable for taxpayers under the new tax regime.
Under the Old Tax Regime for Individuals Below 60 Years:
Gross Total Income: Rs 6,50,000
Deductions under Section 80C: Rs 1,50,000
Total Income: Rs 5,00,000
Income Tax (5% on Rs 2.5 lakh to Rs 5 lakh): Rs 12,500
Less: Rebate under Section 87A: Rs 12,500
Tax Payable: Nil
Note: You can claim deductions under Section 80C for eligible investments, Section 80D for medical insurance, 80CCD for NPS contributions, and Section 80G for donations, among others.
Key Points to Remember When Availing Rebate Under Section 87A:
The rebate applies before adding a health and education cess of 4%.
Only resident individuals are eligible for this rebate.
Senior citizens between 60 and 80 years of age can also avail themselves of this rebate.
The rebate amount is capped at either the limit specified under Section 87A or the total income tax payable (before cess), whichever is lower.
This rebate is available under both the old and new tax regimes.
Rebate Against Various Tax Liabilities:
Section 87A rebate can be claimed against:
Normal income taxed at slab rates.
Long-term capital gains under Section 112 of the Income Tax Act (excluding gains on listed equity shares and equity-oriented mutual funds).
Short-term capital gains on listed equity shares and equity-oriented mutual funds under Section 111A of the Act.
However, note that the rebate cannot be adjusted against tax on long-term capital gains on equity shares and equity-oriented mutual funds under Section 112A.
Eligibility to Claim Rebate Under Section 87A for Previous Financial Years:
For FY 2022-23, you can claim the rebate if:
You are a resident individual.
Your total income, after accounting for deductions under Chapter VI-A (like Section 80C, 80D), does not exceed Rs 5 lakh.
The rebate is capped at Rs 12,500. If your total tax payable is less than Rs 12,500, you won’t have to pay any tax.
Here’s how the rebate applied in previous years:
For FY 2022-23, the rebate limit was Rs 12,500 for a total taxable income of up to Rs 5 lakh.
For FY 2021-22 and FY 2020-21, the rebate limit was also Rs 12,500 for incomes up to Rs 5 lakh.
For FY 2018-19, the limit was Rs 2,500 for incomes up to Rs 3.5 lakh.
For FY 2017-18, the rebate was Rs 2,500 for incomes up to Rs 3.5 lakh.
Example Calculation for Previous Years:
For FY 2017-18:
Total Income: Rs 2,65,000
Tax Payable Before Cess: Rs 750
Rebate Under Section 87A: Rs 750
Tax Payable After Cess: Nil
For FY 2018-19:
Total Income: Rs 3,00,000
Tax Payable Before Cess: Rs 2,500
Rebate Under Section 87A: Rs 2,500
Tax Payable After Cess: Nil
Don’t fall behind on your taxes! With ClearTax’s streamlined 3-step filing process, you can file your taxes early and gain peace of mind. Use the code FIFTY50 to get a 50% discount on your filing.
Understanding the rebate under Section 87A is crucial for optimizing your tax liabilities and ensuring that you benefit fully from the provisions available. By following the steps and considering the examples provided, you can effectively manage your tax obligations and potentially reduce your tax payable amount significantly.
Are you looking for ways to minimize your tax liability even after taking advantage of deductions? The rebate under Section 87A might just be the relief you need. This detailed guide will help you understand how this rebate works and how it can reduce your tax burden.
Introduction to the Rebate Under Section 87A
The rebate under Section 87A is a valuable provision introduced to ease the tax liability for individuals with income within specified limits. For the financial year (FY) 2023-24, this rebate is designed to benefit taxpayers by lowering their tax payable amount. If your total income, after accounting for Chapter VIA deductions, does not exceed Rs 5 lakh under the old tax regime, or Rs 7 lakh under the new tax regime, you are eligible for this rebate. By claiming this rebate, your income tax liability could potentially become nil.
Rebate Under Section 87A for FY 2023-24
For the financial year 2023-24 (Assessment Year 2024-25), the rebate provisions under Section 87A have remained consistent in terms of amount. However, due to changes in the slab rates in the new tax regime, the threshold for eligibility has been updated. Under the old tax regime, individuals with a taxable income of up to Rs 5 lakh are eligible for the rebate. Conversely, under the new tax regime, individuals with a taxable income of up to Rs 7 lakh can avail themselves of this benefit.
How Much Rebate is Allowed Under Section 87A?
If your total taxable income is up to Rs 7 lakh and you choose to follow the new tax regime, you are entitled to a rebate that is the lower of the following amounts:
The total income tax payable on your total income, or
An amount up to Rs 25,000.
For those opting to stay under the old tax regime with a total taxable income of less than Rs 5 lakh, the rebate is the lower of:
The total income tax payable on your total income, or
An amount up to Rs 12,500.
Additionally, under the new tax regime, if your income exceeds Rs 7 lakh and the tax payable on the income over Rs 7 lakh exceeds Rs 7 lakh, the tax will be limited to the extent of the income exceeding Rs 7 lakh.
Here’s a step-by-step breakdown to understand this better:
Example Calculation:
Mr. Ravi, aged 36 years, and a resident of India, has a total income of Rs 7,15,000, which includes his salary and interest from a fixed deposit. Let’s calculate his tax liability for the Assessment Year 2024-25 under the new tax regime.
Calculate the excess income above Rs 7 lakh:
Total income – Rs 7 lakh = Rs 7,15,000 – Rs 7,00,000 = Rs 15,000.
Compute the income-tax liability on the total income:
Tax on the first Rs 3,00,000: Nil.
Tax on the next Rs 3,00,000 @ 5%: Rs 15,000.
Tax on the remaining Rs 1,15,000 @ 10%: Rs 11,500.
Total tax on Rs 7,15,000 = Rs 15,000 + Rs 11,500 = Rs 26,500.
Rebate Calculation:
Since the tax liability (Rs 26,500) is greater than the excess income (Rs 15,000), the rebate under Section 87A would be Rs 15,000 (Rs 26,500 – Rs 11,500).
Therefore, Mr. Ravi's tax payable, considering the rebate, is Rs 11,500 (tax on total income) plus a health & education cess of 4% on Rs 15,000, amounting to Rs 600.
Total Tax Liability: Rs 12,100 (Rs 11,500 + Rs 600).
Steps to Claim a Tax Rebate Under Section 87A
Calculate your gross total income for the financial year.
Apply deductions for tax savings, investments, etc., to arrive at your total income.
Declare your gross income and tax deductions in your Income Tax Return (ITR).
Claim the tax rebate under Section 87A if your total income does not exceed Rs 7 lakh under the new tax regime or Rs 5 lakh under the old tax regime.
The maximum rebate under Section 87A for the Assessment Year 2024-25 is Rs 25,000 under the new tax regime and Rs 12,500 under the old tax regime.
Illustrative Examples for Rebate Calculation:
Under the New Tax Regime for Individuals Below 60 Years:
Gross Total Income: Rs 6,00,000
Deductions under Section 80C: NA
Total Income: Rs 6,00,000
Income Tax (5% on Rs 3 lakh to Rs 6 lakh): Rs 15,000
Less: Rebate under Section 87A: Rs 15,000
Tax Payable: Nil
Note: Deduction under Section 80C is not applicable for taxpayers under the new tax regime.
Under the Old Tax Regime for Individuals Below 60 Years:
Gross Total Income: Rs 6,50,000
Deductions under Section 80C: Rs 1,50,000
Total Income: Rs 5,00,000
Income Tax (5% on Rs 2.5 lakh to Rs 5 lakh): Rs 12,500
Less: Rebate under Section 87A: Rs 12,500
Tax Payable: Nil
Note: You can claim deductions under Section 80C for eligible investments, Section 80D for medical insurance, 80CCD for NPS contributions, and Section 80G for donations, among others.
Key Points to Remember When Availing Rebate Under Section 87A:
The rebate applies before adding a health and education cess of 4%.
Only resident individuals are eligible for this rebate.
Senior citizens between 60 and 80 years of age can also avail themselves of this rebate.
The rebate amount is capped at either the limit specified under Section 87A or the total income tax payable (before cess), whichever is lower.
This rebate is available under both the old and new tax regimes.
Rebate Against Various Tax Liabilities:
Section 87A rebate can be claimed against:
Normal income taxed at slab rates.
Long-term capital gains under Section 112 of the Income Tax Act (excluding gains on listed equity shares and equity-oriented mutual funds).
Short-term capital gains on listed equity shares and equity-oriented mutual funds under Section 111A of the Act.
However, note that the rebate cannot be adjusted against tax on long-term capital gains on equity shares and equity-oriented mutual funds under Section 112A.
Eligibility to Claim Rebate Under Section 87A for Previous Financial Years:
For FY 2022-23, you can claim the rebate if:
You are a resident individual.
Your total income, after accounting for deductions under Chapter VI-A (like Section 80C, 80D), does not exceed Rs 5 lakh.
The rebate is capped at Rs 12,500. If your total tax payable is less than Rs 12,500, you won’t have to pay any tax.
Here’s how the rebate applied in previous years:
For FY 2022-23, the rebate limit was Rs 12,500 for a total taxable income of up to Rs 5 lakh.
For FY 2021-22 and FY 2020-21, the rebate limit was also Rs 12,500 for incomes up to Rs 5 lakh.
For FY 2018-19, the limit was Rs 2,500 for incomes up to Rs 3.5 lakh.
For FY 2017-18, the rebate was Rs 2,500 for incomes up to Rs 3.5 lakh.
Example Calculation for Previous Years:
For FY 2017-18:
Total Income: Rs 2,65,000
Tax Payable Before Cess: Rs 750
Rebate Under Section 87A: Rs 750
Tax Payable After Cess: Nil
For FY 2018-19:
Total Income: Rs 3,00,000
Tax Payable Before Cess: Rs 2,500
Rebate Under Section 87A: Rs 2,500
Tax Payable After Cess: Nil
Don’t fall behind on your taxes! With ClearTax’s streamlined 3-step filing process, you can file your taxes early and gain peace of mind. Use the code FIFTY50 to get a 50% discount on your filing.
Understanding the rebate under Section 87A is crucial for optimizing your tax liabilities and ensuring that you benefit fully from the provisions available. By following the steps and considering the examples provided, you can effectively manage your tax obligations and potentially reduce your tax payable amount significantly.
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