The Income Tax Act offers various tax relief measures to the citizen of India. In this regard, Section 87A provides a tax rebate to the taxpayers when they earn a net taxable income within ₹5 lakhs in a particular financial year. Let’s understand the working of Section 87A of the Income Tax Act in detail-
What is Section 87A of the Income Tax Act?
The tax rebate under section 87A of the Income Tax Act was introduced by the Government of India in the year 2013-2014. Taxpayers can avail the tax rebate under section 87A when the taxable income does not exceed the threshold limit for the given financial year. After the Union Budget 2019, the government has increased the net taxable income to ₹5 lakhs from ₹3.5 lakhs.
Taxpayers can claim a maximum rebate of up to ₹12,500 under section 87A of the Income Tax Act for the financial year 2022-2023 onwards.
Eligibility Criteria to Avail Tax Rebate Under Section 87A
- Taxpayers are required to meet the minimum eligibility criteria to avail the tax relief under section 87A-
- He/she must be the citizen of India
- Individual’s net taxable income should not be more than ₹5 lakhs after deduction of Section 80D, 80C and so on.
- Senior citizen of age more than 60 years but less than 80 years can avail tax rebate under this section
- Super senior residents aged more than 80 years are not eligible for tax rebate under this section
How to Claim Tax Rebate Under Section 87A?
As per the new provision of Section 87A, taxpayers can claim a rebate of ₹12,500 to reduce your tax liability. You can follow the below mentioned steps to claim the tax rebate under section 87A-
Step 1: Calculate your gross total income in the previous financial year
Step 2: Now deduct all the tax deductions that you have claimed for tax saving investments
Step 3: The available balance your taxable income for the financial year
Step 4: Now estimate your gross tax liability on the gross total income and do not add the cess amount
Step 5: You can now claim the section 87A tax rebate on your gross tax liability
How is Section 87A Tax Rebate is Calculated?
Below given is an example to show how section 87A tax rebate is calculated of an ordinary taxpayer for FY 2019-20:
| Sources of income (FY 2019-20) | Income (₹) |
| Gross total income | 6,50,000 |
| Less: Deduction u/s 80C | 1,50,000 |
| Total income | 5,00,000 |
| Income-tax (at 5% from ₹ 2.5 to 5 lakh) | 12,500 |
| Less: Rebate under section 87A | 12,500 |
| Net Tax payable | Nil |
Section 87A of the Income Tax Act- FAQs
No. NRIs are not eligible to claim tax rebate benefits under this section. Only Indian citizens are permitted to avail the tax benefits.
In case you have already paid the taxes, you can claim for rebate under section 87A while filing your Income Tax Return.
Yes. Individual residents earning from agricultural sources are eligible to claim tax rebate under section 87A.
