Are you aware of Rebate u s 87a on your income tax return? Introduced by the Government of India in the year 2013-14, rebate u/s 87A offers benefits from your tax liability. By claiming the benefit of rebate u/s 87A, you can avoid paying taxes up to a certain limit on your taxable income. Let’s dive deeper into how you can claim this rebate and the eligibility criteria.
What is Section 87A Tax Rebate?
Section 87A of the Income Tax Act, 1961 provides tax relief to individuals with low income. The tax rebate is applicable only to individuals who are resident in India and have a taxable income of up to Rs. 5 lakh. If you meet these criteria, you can claim a tax rebate of Rs. 12,500 under Section 87A. The rebate amount is deducted from the total tax payable before adding the Education Cess of 4%.
Eligibility to Claim Rebate Under Section 87A FY 2022-23
To claim a rebate under section 87A, you must meet the following criteria:
- Must be a resident individual of India
- Your total income, less the deductions (under Section 80), should be equal to or less than Rs. 5 lakh for FY 2022-23(AY 2023-24)
- The limit of the rebate is Rs. 12,500. If the total payable tax is lesser than this, that amount will be taken as the rebate. This rebate will be applied to the total tax before the Education Cess of 4% is added.
Recent Changes in Section 87A Tax Rebate
Before Union budget 2023, the government provided tax rebate of INR 12500 on old tax regime as well as the new tax regime if your net taxable income is below 5 lakhs rupee per year. After budget 2023, the government increased the rebate limit to 25000 only for those who opt for new tax regimes with net taxable income below 7 lakhs. The tax rebate under Section 87A remains unchanged for those who opt for the old tax regime in FY 2023-24.
How to Claim Tax Rebate under Section 87A?
If you meet the eligibility criteria, here are the steps involved in claiming the rebate u/s 87A:
- Step 1. Compute your gross total income in the previous financial year.
- Step 2. From this, subtract all the tax deductions that you have claimed for tax-saving investments.
- Step 3. Now, you’ve arrived at your Gross Total Income after tax deductions. This is your taxable income for the financial year (or previous year).
- Step 4. Estimate your gross tax liability on the Gross Total Income, but do not add cess to the amount.
- Step 5. You can claim the 87A rebate on your gross tax liability before cess and arrive at the net tax liability.
In case your total income is below ₹5 lakhs, the maximum rebate under section 87A for the AY 2023-24, i.e. ₹12,500 shall bring down your net tax liability to zero.
Tax Rebate Limit Table From FY 2013-14 to 2023-24
| Financial Year | Net Taxable Income | Tax Rebate Limit u/s 87A |
| 2023-2024 | ₹ 7,00,000 | ₹ 25,000 (New Tax regime) |
| 2023-2024 | ₹ 5,00,000 | ₹ 12,500 (Old Tax regime) |
| 2022-2023 | ₹ 5,00,000 | ₹ 12,500 |
| 2021-2022 | ₹ 5,00,000 | ₹ 12,500 |
| 2020-2021 | ₹ 5,00,000 | ₹ 12,500 |
| 2019-2020 | ₹ 5,00,000 | ₹ 12,500 |
| 2018-2019 | ₹ 3,50,000 | ₹ 2,500 |
| 2017-2018 | ₹ 3,50,000 | ₹ 2,500 |
| 2016-2017 | ₹ 5,00,000 | ₹ 5,000 |
| 2015-2016 | ₹ 5,00,000 | ₹ 2,000 |
| 2014-2015 | ₹ 5,00,000 | ₹ 2,000 |
| 2013-2014 | ₹ 5,00,000 | ₹ 2,000 |
Points to remember for Rebate u/s 87a
- Individuals over 80 years of age are not eligible for tax rebates under Section 87A.
- Only resident individuals can claim a rebate under this section.
- Section 87A rebate is applicable in both the old and new tax regimes.
- The tax rebate is eligible to be claimed before adding the 4% health and education cess.
- The rebate under Section 87A cannot be used for long-term capital gains tax on equity shares and equity-oriented mutual funds, as per Section 112A.
Income Tax Rate Slabs – Old Tax regime
| Income Tax Slab | Individuals Below The Age Of 60 Years |
|---|---|
| Up to Rs. 2.5 lakh | NIL |
| Rs. 2.5 lakh -Rs. 5 lakh | 5% |
| Rs. 5 lakh – Rs .10 lakh | 20% |
| Greater than Rs. 10 lakh | 30% |
Tax Slab for New Income Tax Regime Applicable From FY 2023-24
| Income Range | Tax Rate |
|---|---|
| Above ₹15 lakh | 30% |
| ₹12 lakh to ₹15 lakh | 20% |
| ₹9 lakh to ₹12 lakh | 15% |
| ₹6 lakh to ₹9 lakh | 10% |
| ₹3 lakh to ₹6 lakh | 5% |
| Up to ₹3 lakh | No tax |
Revised Surcharge Rates for New Tax Regime
| Taxable Income Range | Surcharge Rate |
|---|---|
| Above ₹50 lakhs but up to ₹1 crore | 10% |
| Above ₹1 crore but up to ₹2 crore | 15% |
| Above ₹2 crore | 25% |
Frequently Asked Questions (FAQs)
What is Tax Rebate u s 87a for FY 2023-24?
The maximum rebate amount under Section 87A for FY 2023-24 is Rs. 12,500 for those who opt for the old tax regime and Rs. 25,000 for those who opt for the new tax regime with net taxable income below 7 lakhs.
What are the recent changes in Section 87A tax rebate for FY 2023-24?
After Union Budget 2023, the government increased the rebate limit under Section 87A to Rs. 25,000 for those who opt for new tax regimes with net taxable income below 7 lakhs. The rebate remains unchanged for those who opt for the old tax regime.
What is the purpose of Section 87A tax rebate?
The purpose of the Section 87A tax rebate is to provide tax relief to individuals with low income and reduce their tax liability.
Is the Section 87A tax rebate available for non-resident individuals?
No, the Section 87A tax rebate is only available for resident individuals of India.
Can I claim Section 87A tax rebate in the old tax regime?
Yes, you can claim Section 87A tax rebate in the old tax regime if your net taxable income is below 5 lakhs in FY 2022-23(AY 2023-24).