Who is eligible for Income Tax rebate – Section 87A

After calculating tax liability based on the applicable 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 the total income of the previous year.

For instance, if your tax liability is Rs 3,000, a rebate of Rs 2,500 means you need to pay only Rs 500.

Tax rebate section 87A

In India, a resident individual is eligible to claim tax rebate under section 87A if certain conditions as laid down in this section is satisfied. Taxpayers other than a resident individual is not eligible for the benefit of section 87A. For instance, section 87A is not applicable to HUF, Partnership firm, private limited companies, non resident Indians and other companies.

In this article, we will let you know the amount of tax rebate available U/s 87A and when a resident individual will be eligible to claim it.

Rebate under section 87A for FY 2018-19

Tax rebate under section 87A can be claimed for financial year 2018-2019 (AY 2019-20) if total income of that year is less than equal to Rs 3, 50,000. This means, a resident individual can not claim relief under section 87A if total income for the financial year 2018-19 is more than Rs 3.5 lakh rupees.

For financial year 2018-19, tax rebate under section 87A is 2, 500 rupees. If tax liability for FY 2018-19 exceeds Rs 2500, rebate will be available to the extent of Rs 2500 only. It will not be available if the net taxable income is more than Rs 3,50,000.

Tax Rebate for FY 2019-20

However, in the interim budget 2019, government has enhanced the earlier limit of Rs 2,500 to Rs 12,500. As per this change, an individual can claim up to Rs 12,500 as tax rebate under section 87A if his/her income is less than Rs 5,00,000.

If net taxable income of the assessee for the financial year 2019-20 is more than Rs 5,00,000, then rebate under section 87A will be zero. This means, if your net taxable income for the financial year is Rs 5,00,001 then you will not be able to claim rebate under section 87A.

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 and 2018-19 2018-19 and 2019-20 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 from your total income. After calculating tax on total income but before charging cess, you should deduct tax rebate.

Table Showing deduction of rebate

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 U/s 80C to 80U XXXX
8 Total Income (6-7) (Based on this amount section 87A eligibility 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 for the year 2018-19, then you will be eligible to claim relief under section 87A for that year.

Similarly, if it’s less than 5 lakh rupees in financial year 2019-20 then you are eligible for relief under section 87A for the year 2019-20.

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 the year 2018-19 and 2019-20.

If total tax liability for the year 2018-19 is less than Rs 3,500 and for the year 2019-20 it’s less than Rs 12,500 then such lesser amount will be available as relief under section 87A. This means, you can get rebate equal to 100% of income tax payable or tax rebate under section 87A whichever is less.

is a fellow member of the Institute of Chartered Accountants of India. He lives in Bhubaneswar, India. He writes about personal finance, income tax, goods and services tax (GST), company law and other topics on finance. Follow him on facebook or instagram or twitter.