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Tax Rebate Under Section 87A

Highlights

  • Know all the terms and conditions related to Section 87A of the Income Tax Act.
  • You are allowed to claim a rebate of ₹12500 under this section.
  • See the Steps to claim for Income Tax Rebate under section 87A.

Every individual must file an Income Tax Return but contrary to that he must be aware of all the provisions for deductions so that he can reduce tax liability. Therefore, you can see the process to claim income tax rebate under Section 87A.  There are certain rules related to this section that you should know before applying it. Even the individual has to prove his eligibility to get this rebate on the income tax. You can claim the rebate under section 87A only if your income doesn’t exceed ₹5 Lacs in a financial year after all deductions. So, let’s explore all the aspects of Section 87A in detail.

Section 87A – Rules, Process, and Eligibility

You must be aware of the rules that are related to this section. Then, you should know the process to avail of this rebate and see whether you are eligible for it or not.

Rules of Section 87A under Income Tax Act

  • The rebate applies to the total tax before you add the health and education cess of 4%.
  • Only Indian citizens are allowed to enjoy this rebate on their income.
  • The maximum rebate allowed under section 87A is ₹12500.
  • Senior Citizens between the age of 60 years to 80 years are allowed to apply for the rebate under Section 87A.
  • People above 80 years of age or Super Senior Citizens are not allowed for this rebate.
  • The amount of rebate will be the lower of Limit Specified Under Section 87A or Total Income Tax Payable.
  • This rebate is available in old and as well as new tax regimes.
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The process to Claim Income Tax Rebate Under Section 87A

Here are some of the steps that you can apply to get the rebate under section 87A.

  • Compute your gross annual income for the financial year.
  • Claim for all the deductions before computing the total income.
  • You will get the total annual income after making all the deductions like investments and savings.
  • Make sure that your net annual income doesn’t exceed ₹5 Lacs.
  • Now you can claim the rebate under section 87A of the Income Tax Act and it will be a maximum of ₹12500.

For Instance, You can see the table is given below and how this deduction works:

ComponentsIncome for FY 2020-21
Gross Total Income for FY 2020-21₹600000
Less:- Deduction u/s 80C and 80D₹100000 (Max Allowed:- ₹150000)
Total Income for the FY 2020-21₹500000
Income Tax @ 5% from ₹2.5 Lacs to ₹5 Lacs₹12500
Less Rebate u/s 87A₹12500
Income Tax PayableNIL

Eligibility Criteria to Claim this Rebate

  • Individual must be of an Indian Resident.
  • HUF, Companies, Firms, BOI, and AOP are not eligible for this deduction.
  • Total income for the financial year must not exceed ₹5 Lacs after deducting savings and investments.
  • The Rebate will be applied to the total tax before you add the health and education cess of 4%.

Conclusion

It is easy to claim for income rebate under section 87A of the income tax act. Make sure that your total income after all deductions doesn’t exceed ₹5 lacs. You can get a rebate of up to ₹12500 in the FY 2020-21 by applying section 87A. If in case you are a super senior citizen above the age of 80 years then you are not eligible for this deduction.

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