What is a section 87A tax rebate? Under the Income Tax Law, all individuals and legal entities are
required to pay income tax if their income exceeds the income tax threshold. However, income tax
laws provide for an allowance under section 87A that can reduce net income tax.
You can apply for a maximum rebate of up to Rs.12, 500
under section 87A of the Income Tax Act for the fiscal year 2020-21.
Section 87A was first introduced by the government in
the Treasury Act 2003.
The original maximum tax refund limit under section
87A of the Income Tax Act was Rs.2, 000. Increased to Rs.5,000 in the
The 2017 Union budget raised Rs.2,500 for people whose
net taxable income was up to Rs.3,50,000. After the adoption of the Union
budget for 2019, the government increased the net taxable income to 5 lakhs.
The 87A rebate limit has also been raised to Rs.12,500.
What is an income tax refund?
An income tax refund can simply be understood as a
form of a tax refund that you receive from the Income Tax Department under
certain circumstances. An individual is required to receive a tax credit if
they pay more taxes in a financial year than they owe to the government. In
order to take advantage of the tax credit, you need to make sure that you
accurately calculate your tax liability and file your tax returns within a
certain period of time.
When was Section 87A introduced?
The Section 87A rebate was first offered in 2013 and
has been in effect for several years, most recently updated in 2019. Under the
latest provisions of Section 87A, any individual with an annual taxable income
of up to 5 lakhs can benefit. from a discount on income tax in the amount of
12,500 rubles. Essentially, this results in persons with an annual income below
5 lakhs being completely exempt from income tax and can actually save on income
tax in
Section 87A - Then and Now
Interestingly, the income tax refund offered under
section 87A has undergone a number of changes since its introduction in 2013.
Recently, in the Fiscal Year, 2018-2019, income tax refund under section 87A 87A
was limited to a much lower amount of Rs 2,500. Thus, if your total taxable
income exceeds Rs 3.5 lakh and your tax liability exceeds Rs 2,500, Section 87A
can no longer serve as a tax exemption for you.
Eligibility Criteria for Income Tax Refund Request u/s
87A for the Fiscal Year 2020-21 and Fiscal Year 2019-20
Here are the eligibility criteria for applying for the
u/s 87A rebate of the Income Tax Act of 1961:
1. You can only claim the 87A rebate on the total
gross tax before adding the 4% health and education tax.
2. Only resident individuals may benefit from the
relief referred to in Article 87A.
3. Seniors (aged 60 to 80) may also apply for a
discount under Section 87A.
4. Super seniors (over 80), on the other hand, cannot
take advantage of the 87A discount.
5. The maximum amount you can claim as an 87A rebate
must be the cap in section 87A (Rs.12,500) or the gross amount before tax,
whichever is less.
6. The Section 87A reduction is available for both the
old and the new income tax regime. Therefore, you may apply for a rebate under
Section 87A for both F.Y2021-22 and F.Y2022-23
How is income tax refund calculated?
To calculate the discount:
1) Calculate Gross Income - Sum income from all
sources such as wages, capital gains, house rent, and income from other
sources.
2) Find your net taxable income. Apply Section 80
deductions to your gross income, if applicable.
3) For net taxable income equal to or less than 5
lakhs, a rebate may be claimed under section 87A.
Three things to consider in section 87A
The tax credit offered under section 87A can be a big
relief for various citizens across the country. However, here are some points
that a taxpayer should keep in mind before thinking about income tax savings in
1. This Section 87A tax refund cannot be used by
non-resident Indians who are NRIs.
2. The benefits of this tax cut are not possible.
