Income Tax rebate – Section 87A

After calculating tax liability based on the slab rates, you are required to deduct tax rebate under section 87A if it’s applicable to you. A rebate is like a discount that you get on your income tax based on total income of the year.

For instance, if your tax liability is Rs 7000, a rebate of Rs 5000 means you need to pay only Rs 2000.

In India, a resident individual is eligible to claim tax rebate under section 87A if certain conditions as laid down in this section are followed.

Tax rebate section 87A

In this article, we will let you know the amount of tax rebate available under section 87A and when a resident individual will be eligible to claim such rebate.

Tax rebate under section 87A can be claimed for financial year 2016-2017 (AY 2017-18) if total income of that year is less than Rs 5, 00,000. This means, a resident individual can not claim relief under section 87A if total income is more than 5 lakh rupees.

Earlier to financial year 2016-17, the limit was Rs 2,000. Budget 2016 has increased it to Rs 5000.

For financial year 2017-18, budget 2017 has proposed to reduce this relief to 2, 500 rupees. It’s also proposed to make available to those resident individuals whose total income does not exceed 3, 50,000 rupees during the financial year 2017-18 (AY 2018-19).

Income Tax Rebate U/s 87A

Financial Year Assessment Year Rebate Amount in INR When Rebate Can be Availed
2016-17 2017-18 5000 If Total income of the financial year is less than Rs 5,00,000
2017-18 2018-19 2500 If Total income of the financial year is less than Rs 3,50,000

Eligibility for section 87A relief will be decided on the taxpayer’s Total or taxable income, not on gross total income.

You need to deduct all eligible deductions from section 80C to 80U under chapter VI-A to calculate tax. After calculating tax but before charging cess, you should deduct tax rebate.

Table Showing deduction of rebate in calculation of tax liability

Sr. No Particulars Amount in INR
1 Income under the head salary XXXX
2 Income under the head house property XXXX
3 Income under the head profits from business or profession XXXX
4 Income under the head capital gain XXXX
5 Income under the head other sources XXXX
6 Gross Total Income (1+2+3+4+5) XXXX
7 Deduction from section 80C to Section 80U XXXX
8 Total Income (6-7) (Based on this amount your eligibility for tax rebate will be decided.) XXXX
9 Tax Payable on Total Income XXXX
10 Income Tax Rebate U/s 87A XXXX
11 Total Tax Payable ( 9-10) XXXX
12 Education Cess and SHEC  @3% XXXX
13 Actual Tax Payable if any (11+12) XXXX

If serial number 8 (Total Income) is less than 3.5 lakh rupees in the year 2017-18 then you will be eligible claim tax relief under section 87A for that year. Similarly, if it’s less than 5 lakh rupees in financial year 2016-17 then you are eligible for tax relief under section 87A for the year 2016-17.

Section 87A benefit will not be available to a super senior citizen (individuals above 80 years of age) as for them income up to 5 lakh rupees is already exempted for tax year 2016-17 and 2017-18.

If total tax liability for the year 2016-17 is less than Rs 5000 or for the year 2017-18 it’s less than Rs 2500 then such lesser amount will be available as tax relief under section 87A. This means, you can get rebate in tax equal to 100% of income tax payable or tax rebate under section 87A whichever is less.

Section 87A tax relief is not available to a Non-resident individual. HUF, Companies, Partnership Firm and LLP are also not eligible to claim income tax rebate under section 87A.