All about rebate under section 87A

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All about rebate under section 87A

One of the most beneficial rebate unde the Income Tax Act – 1961 is a rebate u/s 87A.  It a simple and straightforward rebate and the section granting it is worded in the simplest possible way.

Section 87A of Income Tax Act, 1961 is reproduced hereunder:

 

“An assessee being an individual resident in India, whose total Income does not exceed Rupees Five Lakhs, shall be entitled to a deduction, from the amount of income tax (as computed before allowing deductions under this chapter) on his total income with which he is chargeable for any assessment year, of an amount equal to hundred per cent of such income-tax or an amount of Rs. Twelve thousand five hundred, whichever is less.”

The key feature of section 87A is as under:

  1. Rebate u/s 87A is available only aResidentIndividual. Rebate u/s 87A is not available to HUF. Even the Non Resident are not eligible for tax rebate as this rebate is available to residents only.
  2. There is a ceiling on the total income for claiming rebate u/s 87A. The total Incomeafter all deductions including deduction under Chapter VIAshould not exceed Rs 5 lakhs. Even if the income exceeds Rs 5 Lakh by Rs. 10 then no rebate u/s 87 will be admissible.
  3. Total rebate is limited to a maximum of Rs 12,500. In short, lower of actual income tax liability of the resident individual tax payers or Rs. 12,500/- is available as deduction u/s 87A.
  4. This rebate is available on the tax computed before charging ofEducation & Health Cess which is 4% a present.

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