Section 87A – Tax rebate of Rs. 2000 for resident individuals with income up to Rs. 5, 00,000

Finance minister Mr. P. Chidambaram has inserted section 87A by allowing a tax rebate of Rs. 2000 to all resident individuals who are having taxable income up to Rs. 5, 00,000 for a financial year.

With the introduction of section 87A, our finance minister has expectation of providing benefits of Rs. 3, 600 crore to an individual assessee.

IT slab rates of last year (i.e. Financial Year 2012-2013) will remain unchanged this year (i.e. FY 2013-2014). With this introduction, income of an individual will be taxable at a rate that was applicable last year.Section 87A – Tax rebate of Rs. 2,000

Income tax rebate of Rs. 2000 will be applicable to a resident individual who can be an ordinarily resident or not ordinarily resident of India.

As per section 87A, this rebate of Rs. 2000 will be available only if the income is up to Rs. 5, 00,000 after allowing deductions as applicable from the gross total income.

However, if the tax liability is less then Rs. 2000 then rebate under section 87A will be restricted up to income tax liability.

Rebate under section 87A will be available before adding surcharge and education cess. That means after providing rebate of Rs.2000 (i.e. Rs. 2000 or tax liability whichever is lower) from the income tax liability we need to calculate surcharge and education cess on it.

Budget 2016-17 has increased the rebate amount from Rs 2000 to Rs. 5000. Due to this change, from Financial Year 2016-17 onward, tax rebate under section 87A will be Rs. 5000.

Chart showing rebate Available Under Section 87A to an individual resident in India whose total income does not exceed 5 Lakh rupees.

S. No.

Rebate available for Financial Year

Rebate under section 87A in INR

1

2016-17 & Subsequent financial years unless withdrawn

5,000

2

2015-16

2,000

3

2014-15

2,000

4

2013-14

2,000

Effect of Section 87A on basic exemption limit

With the introduction of section 87A except senior citizens all other individuals having income up to Rs. 2, 20,000 will not be required to pay income tax from assessment year 2014-2015 on-wards.

If income of such individual is above Rs. 2, 20,000 but not exceeding Rs. 5, 00,000 a tax rebate of Rs. 2000 will be allowed from his income tax liability before adding surcharge and education cess to it.

Individuals being a senior citizen of India will not be liable to income tax if their total income is up to Rs. 2, 70,000. Income tax rebate of Rs. 2000 will be available under section 87A if individual not being a senior citizen has income above Rs. 2, 70,000 but not exceeding Rs. 5, 00,000.

As provisions of section 87A is applicable to those resident individuals who has income not exceeding Rs. 5, 00,000, this provision will not be applicable to resident individual who is at least of 80 years of age at any time during the previous year.

Resident individual who is at least of 80 years of age at any time during the previous year will not be taxable up to Rs. 5, 00,000 as the basic exemption limit for these individuals are remain unchanged to Rs. 5, 00,000.

Section 87A is applicable only to resident individuals. It is not applicable to a non resident individual, resident or non resident HUF/AOP/BOI or any other assessee other than resident individual.

Leave a Reply

Your email address will not be published. Required fields are marked *