The Income Tax Act of India provides several provisions that allow individuals to lower their tax burden. Section 87A is one such provision, which is meant to reduce the overall tax burden of individuals belonging to the lower tax bracket.
What is Section 87A?
Here is a detailed tax rebate guide –
- Income eligibility
A taxpayer can avail income tax rebate under Section 87A if his/her total taxable income is less than Rs.5 lakh.
For instance, an individual can avail annual tax exemptions under Section 80C and 24B on a home loan principal and interest amount, respectively. Section 80C provides exemption of up to Rs.1.5 lakh on the principal amount, and Section 24B offers deduction of up to Rs.2 lakh on the interest amount.
If after such deductions, a taxpayer’s gross income stands at Rs.5 lakh, he/she can enjoy the rebate.
- Tax liability
The net payable amount is also a crucial point of eligibility for a rebate in income tax under Section 87A. According to that clause, an individual’s net tax payable should be equal to or more than Rs.2000. If it’s less than Rs.2000, this clause will not be applicable.
- Maximum rebate
A taxpayer can enjoy maximum tax rebate of Rs.12,500 under Section 87A.
- Cess calculation
When income tax liability is calculated, 4% cess on education is added to that after the rebate has been applied.
- Taxpayer criteria
Income tax rebate under this section is only applicable to resident individuals. HUFs, companies or firms, AOP/BOI, and NRIs do not qualify. Super senior citizens also cannot enjoy rebate under this section.
Read Also: TAX REBATE UNDER SECTION 87A
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