Do you know Indian taxpayers can apply for a tax rebate under section 87A of the tax laws? For most people, filing income tax can be a tedious experience. Nonetheless, if your current remuneration falls under the low-income category, there's some good news. It's time you understand what is rebate under Section 87a to obtain maximum benefits. Keep reading to explore more about the rebate under Section 87a, eligibility and its benefits.
In the simplest terms, a rebate is like a refund that you receive from the Income tax department. But the catch is that there are certain circumstances and criteria that individuals must fulfil to be eligible for a rebate.
For instance, taxpayers may qualify for a rebate if they have paid more than their tax liability. In every circumstance, taxpayers must accurately calculate their tax liability and file their income tax returns within a given period.
So what exactly is tax rebate under Section 87A, and why is it so relevant to most taxpayers?
Section 87A is a provision under the IT Act for those whose annual income is below a certain limit. In the old regime, Section 87A allowed individuals with income up to INR 5 lakh/annum to apply for this benefit. Taxpayers in this category can avail of a rebate of up to INR 12500 on their tax liability in a financial year.
Moreover, the new tax regime has increased the rebate to INR 25000 for taxable income up to INR 7 LPA. This also means that these individuals can effectively save on income tax, resulting in more disposable income.
The Income Tax Act states that resident Indians qualify for a rebate under 87A. Also, Hindu United Families and NRI are not eligible to seek a rebate under this section.
Besides, the corporates or firms also do not qualify for the Section 87A rebate. Notably, while senior citizens aged 60-80 can seek a rebate, super seniors or those above 80 are not eligible.
There are a few steps eligible taxpayers must follow to find their net taxable income and apply for a rebate under the new regime.
Step 1: Calculate your gross income by adding income from house rent, salary, capital gains, etc.
Step 2: Subtract any deductions applicable (like Section 80) to your gross income to arrive at your net taxable income.
Step 3: If your net taxable income is below INR 7 LPA, you may apply for a tax rebate under Section 87A.
The rebate under Section 87A is automatically considered at the time of income tax filing.
Income tax filing is the responsibility of every Indian taxpayer. And to help taxpayers beneath an income threshold, the laws allow individuals to claim a rebate to ensure more savings. With richer insights on what is rebate under section 87a, it is important you consider it during your tax filing.
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The limit for Section 87A varies for the old and new tax regimes. Under the old tax regime, the limit is set to an income of INR 5 Lakh/annum. While for the new tax regime, it is set at INR 7 Lakh/annum.
Non-resident Indians, Hindu United Family, Corporations, Firms and Super Senior Citizens over 80 are not eligible for 87A.
