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Reading: Section 87A of the Income Tax Act
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Investment Simplified > Tax > Section 87A of the Income Tax Act
Tax

Section 87A of the Income Tax Act

Ashish Kumar
Ashish Kumar January 11, 2023 3 Min Read
Updated 2023/01/11 at 6:30 PM
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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-

Contents
What is Section 87A of the Income Tax Act?Eligibility Criteria to Avail Tax Rebate Under Section 87AHow to Claim Tax Rebate Under Section 87A?How is Section 87A Tax Rebate is Calculated?Section 87A of the Income Tax Act- FAQs

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 income6,50,000
Less: Deduction u/s 80C1,50,000
Total income5,00,000
Income-tax (at 5% from ₹ 2.5 to 5 lakh)12,500
Less: Rebate under section 87A12,500
Net Tax payableNil

Section 87A of the Income Tax Act- FAQs

Can NRIs avail the tax rebate benefits under section 87A?

No. NRIs are not eligible to claim tax rebate benefits under this section. Only Indian citizens are permitted to avail the tax benefits.

Can I claim a rebate under section 87A after I have paid their taxes for a FY?

In case you have already paid the taxes, you can claim for rebate under section 87A while filing your Income Tax Return.

Is tax relief available for agricultural income under section 87A?

Yes. Individual residents earning from agricultural sources are eligible to claim tax rebate under section 87A.

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Posted by Ashish Kumar
Ashish Kumar is a SEO content writing enthusiast and an avid blogger who closely follows the latest financial trends. He writes about various topics related to Insurance, Aadhaar, PAN, Banking and other financial products.
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