Read on to know everything about tax rebate under 87A, how it works, eligibility and process to claim rebate.
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6-February-2024
Various tax provisions under the Income Tax Act provide tax relief to taxpayers. Section 87A of the Income Tax Act is one such provision that offers the 87A rebate, providing tax relief to individuals whose net taxable income does not exceed a certain limit.
What is an income tax rebate?
Income tax rebate refers to a deduction from the total tax payable by an individual. Unlike tax deductions that reduce taxable income, rebates directly decrease the tax liability, resulting in a reduction of the final tax payable. Taxpayers can claim a tax rebate if they have overpaid taxes or if they are eligible for a tax credit.
What is Section 87A rebate for 87A for FY 2023-24 (AY 2024-25)?
Introduced in the Budget 2013, section 87A provides an income tax rebate to individuals with an income under a certain threshold. The Indian government introduced this provision to provide tax relief to low-income taxpayers. Section 87A of the Income Tax Act applies to individuals, Hindu Undivided Families (HUFs), and other taxpayers who meet the eligibility criteria. For FY 2024-25 (AY 2025-26), the rebate limit will continue as before i.e., up to Rs. 7 lakh under the new tax regime.
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What is the income tax rebate under section 87A?
Income tax rebate under section 87A allows eligible individuals to avail of a rebate on their total tax liability. As per the provisions of this section, taxpayers meeting specific criteria are entitled to a rebate of up to a certain amount, thereby reducing their tax burden.
Both the previous and current income tax systems maintain an unaltered refund amount under section 87A for the financial years 2021-22 and 2022-23 (87a rebate in new tax regime for AY 2022-23 and 2023-24).
- A resident individual with taxable income not exceeding Rs. 5 lakh remains eligible for a tax rebate of Rs. 12,500 or the equivalent of the tax payable, whichever is lower.
- In the new income tax system, alterations have been made to the rebate under section 87A for the financial year 2023-24 (assessment year 2024-25). A resident individual with taxable income not exceeding Rs. 7 lakh will now receive a tax relief of Rs. 25,000. The previous tax regime persists, maintaining the rebate of Rs. 12,500 for income up to Rs. 5 lakh.
Also, read: 115bac of income tax act
Understanding the Section 87A Rebate for FY 2024-25 and AY 2025-26
Section 87A of the Income Tax Act, 1961, stipulates a provision for a tax rebate applicable to resident individuals with taxable income falling below a specific threshold. For the fiscal year 2024-25 (Assessment Year 2025-26),the 87a rebate threshold remains unchanged, allowing individuals with taxable income up to Rs. 7 lakh to benefit from this provision under the new tax regime.
Consequently, individuals meeting the criteria of having taxable income not exceeding Rs. 7 lakh are eligible for a rebate equivalent to Rs. 25,000 or the total tax payable, whichever amount is lesser.Additionally, it is crucial to understand the applicable income tax slabs for FY 24-25 under both old and new tax regimes.
How to claim tax rebate under section 87A?
Claiming a tax rebate under section 87A is a straightforward process. It is crucial to accurately calculate the rebate amount and ensure compliance with the conditions specified under section 87A. Given below are the steps for the same:
- Step 1:Calculate your gross total income for the previous financial year.
- Step 2:Deduct all tax-saving investments and deductions claimed from the gross total income.
- Step 3:This deduction leaves you with your gross total income after tax deductions, which is your taxable income for the financial year (or the previous year).
- Step 4:Estimate your gross tax liability based on the gross total income, excluding any cess.
- Step 5:Apply the 87A rebate to your gross tax liability before cess to determine your net tax liability.
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Eligibility criteria to claim income tax rebate under 87A
To claim an income tax rebate under section 87A, the taxpayer must meet the following criteria:
- The taxpayer must be an individual taxpayer, Hindu Undivided Family (HUF), or any other taxpayer.
- The tax rebate is only available to those with a net taxable income below Rs. 5 lakh.
- The tax rebate is available only to those taxpayers who do not have any agricultural income.
- The tax rebate is available only to those taxpayers who are Indian residents.
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Steps to claim rebate under section 87A rebate in ITR filing?
To claim the us 87A rebate in your Income Tax Return (ITR) filing, follow these steps:
- Compute your gross total income for the financial year.
- Subtract eligible tax deductions for savings, investments, etc.
- Determine your total income after accounting for these deductions.
- Report your gross income and deductions in your ITR.
- If your total income does not exceed Rs. 7 lakh under the new tax regime or Rs. 5 lakh under the old regime, claim the tax rebate under Section 87A. The maximum rebate for AY 2024-25 is Rs. 25,000 under the new regime and Rs. 12,500 under the old regime.
Things to remember while availing rebate under section 87A
Taxpayers claiming a rebate under section 87A must keep in mind the following points:
Compliance with tax laws:
Ensure compliance with all relevant tax laws and regulations while claiming the rebate. This includes filing your Income Tax Return (ITR) on time, accurately reporting income, and correctly applying for deductions. Non-compliance can lead to penalties, fines, or disqualification from receiving the rebate.
Accurate calculation:
Calculate the rebate amount diligently to avoid any discrepancies in tax filing. Any miscalculations or errors in determining your tax liability can result in discrepancies, potentially leading to delays or issues with your tax filing.
Keep documentation:
Maintain proper documentation of income, deductions, and tax payments for seamless filing and claim of rebate. This documentation will support your rebate claim, facilitate seamless ITR filing, and provide evidence in case of an audit or query from tax authorities.
Review eligibility:
Regularly review eligibility criteria and any changes in tax laws to maximise benefits. Staying informed about updates will help you maximise your tax benefits and ensure that you meet all requirements to claim the rebate effectively each financial year.
In conclusion, income tax rebate under section 87A serves as a significant relief for taxpayers, particularly those with modest incomes. By reducing the tax burden on eligible individuals, this provision promotes tax compliance and financial inclusivity. Taxpayers are encouraged to leverage the benefits offered under section 87A by adhering to the prescribed criteria and procedures.
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Frequently asked questions
Can the 87A rebate be claimed on agricultural income?
Yes, the income tax rebate under section 87A is applicable to taxable income, encompassing agricultural incomes as well.
What is the 87A limit in 2024?
Section 87A of the Income Tax Act, 1961, offers a tax rebate for resident individuals with taxable income below a specific threshold. For the fiscal year 2024-25 (AY 2025-26), the rebate limit remains unchanged, continuing at up to Rs. 7 lakh under the new tax regime.
Are NRIs eligible to claim a rebate under section 87A?
Rebate under section 87A is only applicable for Indian citizens and not for NRIs.
Who is eligible for an 87A rebate?
Resident individuals in India with a total taxable income of up to Rs. 7 lakh under the new tax regime or up to Rs. 5 lakh under the old regime are eligible for the Section 87A rebate, reducing their tax liability.
How is section 87A rebate calculated?
The Section 87A rebate is calculated by reducing the tax liability for eligible individuals. Under the new tax regime, the maximum rebate is Rs. 25,000, while under the old regime, it is Rs. 12,500, based on the taxable income limit.
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