As per a report, the total number of individuals paying income tax saw an increase of only 22% in the period between 2002-03 and 2018-19. Hence, to encourage more individuals into paying their income taxes in time, the Government of India offers income tax rebate under section 87A of the Income Tax Act.
Below is an explanation to help you gain a better understanding of what is tax rebate.
Tax rebate can be defined as an amount that it is refunded to the taxpayer when he or she pays more than it is needed to.
The primary points for its applicability include –
- Individuals whose net annual income is Rs.5,00,000 or below can avail exemption from paying any taxes. Thus, one can receive a rebate of up to Rs.12,500 on his/her tax under this section.
- Only individuals can avail the rebate facility under section 87A. Entities such as Hindu Undivided Family, company, firm, etc. cannot enjoy this benefit.
- To avail this benefit, Indians must file their income tax returns.
- The tax rebate will apply to the total income amount of an Individual before the health and education cess is calculated.
- The taxpayer should be a residential citizen of India to avail an income tax rebate.
Besides section 87A, Individuals can opt for several other exemptions under the Income Tax Act. For instance, individuals can avail deductions on principal and interest component when repaying their home loans.
However, individuals must keep in mind that the net annual income should not exceed Rs.5 lakh even after applying for exemptions to avail this rebate under section 87A.
Additional Read: WHAT IS TAX REBATE UNDER SECTION 87A?
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