Additional rebate for taxpayers having total income less than Rs. 5,00,000/-

What is tax rebate U/s. 87A?

Rebate U/s. 87A refers to allowance granted to small taxpayers in the form of reduction in tax. Till Financial year 2014-15, the rebate was of Rs. 2,000/- However, our Finance Minister in Finance Bill, 2016 has recently increased this rebate to Rs. 5,000/-. Hence, with effect from 1st April, 2016, a big relief has been given by Government of India to small taxpayers.

In case the taxpayers Gross Total Income is more than Rs. 5,00,000/-, however after deducting tax saver Deductions like 80C, 80D, 80G, if his Total Income amounts to less than Rs. 5,00,000/-, then taxpayer can claim the benefit of rebate U/s. 87A.

Suppose my Gross Total Income is Rs. 5,50,000/- and I have paid Life Insurance premium of Rs.50,000/-. Will I be eligible to claim the rebate?

Ans. :- Yes. In this case “ Gross Total Income” is Rs. 5,50,000/- whereas eligible tax saver Deduction available under Chapter VI (Life insurance premium) is Rs. 50,000/-. My “total income” comes to Rs. 5,00,000/-, hence I can claim the benefit of section 87A.

Who are the small taxpayers eligible for rebate U/s. 87A?

1. This rebate is available to all RESIDENT Individuals whose Total Income is below Rs. 5,00,000 during a Financial Year. Rebate is also available to Senior citizens (individuals whose age is between 60 to 80 years).

2. However, no benefit of such rebate is available to Super Senior citizens (individuals above the age of 80 years) as their Income is already exempt from Income-tax upto Rs. 5,00,000.

3. Do note that such rebate is available only to Individuals and not to any HUF, Partnership firms, LLPs or Companies etc

How can this rebate be availed?

This rebate is to be subtracted from Total Tax payable before adding Education cess. Rebate allowed will be is Rs. 5000 or Total Tax payable (excluding rebate), whichever is lower.

Let us take an example:-

Salary income of Miss Komal (age 30 years) is Rs. 4,20,000/- for F.Y. 2014-15. She also received Interest from Bank Fixed Deposits of Rs. 1,00,000/-. Her Investment in PPF is Rs. 1,00,000/- and Provident Fund Rs. 20,000/-. How much tax is payable by Miss Komal after considering rebate U/s. 87A?

Also explain how tax is saved due to increase in rebate from F.Y. 2015-16 with same total income.

Ans. :- Computation of tax payable by Miss Komal for F.Y. 2014-15 and F.Y. 2015-16

Now, calculation of rebate U/s. 87A-

So, this was all about rebate U/s. 87A. If case you have any queries regarding this topic or any other Income-tax related topic, ask us on myITreturn.com and your query will be resolved. If you want to get your return filed with the help of our Tax experts , opt for Assisted filing service and get it done accurately and quickly.