87A in Income Tax
A summary of Section 87A in Income Tax
In this post, we’ll examine the rebates under Section 87A, including eligibility, methods of claim, and more. Let’s examine each section in detail:
What is section 87A of Income Tax Act?
Section 87A was introduced to the Income Tax Act in the 2013 budget. It gives a tax rebate to persons who earn less than a certain amount, reducing the tax burden on people with lower incomes.
This rule applies to individuals, Hindu Undivided Families (HUFs), and other qualifying taxpayers. For the financial year 2024-25 (assessment year 2025-26), the refund maximum remains unchanged: up to Rs. 7 lakh for individuals who follow the new tax laws.
Rebate under section 87A for FY 2024-25
Section 87A of the Income Tax Act of 1961 offers a rebate in income tax for resident individuals with taxable income up to a specific level. The rebate limit would remain unchanged for FY 2024-25 (AY 2025-26), at Rs. 7,00,000 under the new tax regime.
This means that a resident with taxable income up to Rs. 7,00,000 can claim a rebate of Rs. 25,000 or the amount of tax payable, whichever is less. Under the previous tax regime, the rebate maximum remained at Rs. 5,00,000, while the rebate amount was Rs. 12,500.
Eligibility to Claim a Rebate from Section 87A?
Section 87A of the Income Tax Act allows you to claim a tax rebate if you meet the following conditions:
- The taxpayer must be an individual residing in India.
- Your total income after Chapter VI-A deductions (Sections 80C, 80D, and so on) should be at most Rs 5 lakh.
- The tax rebate is limited to Rs 12,500. If your total tax payable is less than Rs 12,500, you will not be required to pay any tax.
- Senior citizens (60 to 80) are eligible for the rebate.
- Super senior citizens (above 80) are ineligible for the rebate.
Steps to Claim Rebate u/s 87A?
To receive a tax rebate under Section 87A for the Financial year 2024-2025, follow these steps:
1: Determine your Gross Total Income for Financial Year 2024-2025.
2: Subtract any tax rebates you are eligible for, such as those for life insurance, investments, and other tax-saving instruments.
3: Subtract the tax deductions available under the Income Tax Act of 1961 from your total income.
4: When filling out your income tax return (ITR), declare your gross income and tax deductions.
5: After filing your ITR, you may receive a tax rebate under Section 87A.
Things to remember while availing rebate under Section 87A
Before applying for the rebate under Section 87A, keep the following points in mind:
Eligibility Criteria:
- Only resident individuals are eligible for the rebate.
- Senior citizens aged 60 to 79 are eligible for the rebate.
- Super senior citizens aged 80 and up are not eligible for the rebate.
Rebate Amount:
- The rebate can be used to the whole tax amount before adding the 4% health and education cess.
- The rebate amount will be the lowest of the Section 87A limit or the total income tax payable (before cess).
Tax Regime:
- The rebate is accessible for both the previous and new tax systems.
Applicable Tax Liabilities:
The rebate can be claimed against the following tax liabilities:
- Normal income is taxed according to the slab rate.
- Long-term capital gains under Section 112 of the Income Tax Act (excluding listed equity shares and equity-oriented mutual fund schemes).
- Under Section 111A, short-term capital gains on listed equity shares and equities-oriented mutual fund schemes are taxed at a 15% flat rate.
Non-Applicable Tax Liabilities:
- Section 112A prohibits adjusting the rebate against tax on long-term capital gains on equity shares and equity-oriented mutual funds.
Rebate Against Various Tax Liabilities
Some tax liabilities allow you to claim a Section 87A rebate:
- Regular income is taxed at the income tax* slab rate.
- Short-term capital gains are taxed at a fixed rate of 15%. Under Section 111A of the Act, these gains are calculated for equity-oriented mutual fund schemes and listed equity shares.
- Long-term capital gains on the sale of any capital asset are taxable under Section 112 of the Income Tax Act.
Section 87A does not allow you to claim a rebate for long-term capital gains on equity mutual funds or equity shares. These instruments fall under Section 112A.
This concludes our blog post on rebate under Section 87A. If you have any additional questions or concerns, please leave a comment.
FAQs
1.Can NRIs get rebates under Section 87A?
Ans: Non-resident Indians (NRIs) cannot benefit from the rebate under Section 87A.
2.Is a rebate under section 87A accessible to HUF or its members?
Ans: Only people are eligible for a rebate under Section 87A. As a result, HUF members can claim a rebate under Section 87A as Indian residents. However, no rebate shall be granted to HUF.
3.Is the 87A rebate available for agricultural income?
Ans: Yes, residents whose income comes from agricultural sources can also seek a tax credit under Section 87A.
4.How can I calculate a rebate under 87A?
Ans: To compute the refund under section 87A, subtract your total income from the allowed deductions under sections 80C through 80U. If your net taxable income is less than Rs. 5 lakhs, you are now eligible for a rebate of up to Rs 12500 on the tax payable before the health and education cess.
