You can claim your rebate of income tax under section 87A of the Income-tax Act, 1961 as amended by the Finance Act, 2016. Section 87A was newly inserted by the Finance Act, 2013 to provide tax relief upto two thousand rupees to the individual tax payers. Further, the rebate amount has been increased to five thousand rupees in Budget 2016.
Accordingly, if your total income for financial year 2016-17 does not exceed ₹500000 then you will be eligible to claim rebate in income-tax u/s 87A up to ₹5000 at the time of filing your Income Tax Return for assessment year 2017-18. Thus, this tax relief will be provided to individual tax payers who are in the 10% tax slab.
Rebate of income-tax for resident Individuals under section 87A
As per section 87A of the Income Tax Act, 1961 as amended by the Finance Act, 2016, an assessee, being an individual resident in India, whose total income does not exceed five hundred thousand rupees, shall be eligible for rebate in income-tax equal to hundred per cent of such income-tax or five thousand rupees, whichever is less.
The amount of rebate allowable under section 87A has been increased from the existing ₹2000 (up to AY 2016-17) to ₹5000 (from AY 2017-18 onwards). Therefore, the increased amount of rebate shall take effect from 1st April, 2017 and will, accordingly, apply in relation to assessment year 2017-2018 and subsequent years.
In other words, any resident individual having total income not exceeding ₹500000 shall get a tax relief upto ₹5000 i.e. the rebate would be the tax payable/liability subject to maximum ₹5000. Thus, the amount of rebate shall be 100 per cent of income-tax or ₹5000, whichever is less.
Note that this rebate is available to only individual assessee and not to other persons like HUF, AOP/BOI, Firm and company. Further, the non-resident individual and resident individual with age of 80 years or more shall not be eligible for rebate under section 87A of Income-tax Act, 1961.
The aggregate amount of rebate under section 87A shall not exceed the amount of income-tax as computed before allowing such rebate on the total income of the assessee with which he is chargeable for any assessment year.
Main Provisions of section87A:
An assessee, being an individual resident in India, whose total income does not exceed five hundred thousand rupees, shall be entitled to a deduction, from the amount of income-tax (as computed before allowing the 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 five thousand rupees, whichever is less.
Must know some basic knowledge for section 87A:
Following are some basic conceptual information which might solve your initial queries regarding the provisions of section 87A of the Income-tax Act, 1961:
- Rebate shall be available to both Male and Female assesses
- Since, this is only for Resident Individual, Non-resident assessee will not get relief u/s 87A.
- This is also available for senior citizen (age 60 or above) but not for super senior citizen.
- Section 87A would be available only if total income not more than ₹5 Lakh.
- Rebate shall be deducted from the amount of income-tax and not from total income.
- Section 87A is a rebate under CHAPTER VIII and not a deduction CHAPTER VIA.
- This rebate shall be applicable from 1st April, 2014 i.e. A.Y. 2014-15.
- Amount of rebate would be lower of tax payable or ₹2,000 till FY 2015-16 and 5,000 for FY 2016-17 onwards.
FAQs related to 87A rebate of Income-tax
1) Increased Exemption Limit due to Section 87A:
Many tax payers have misconceptions regarding the conceptual clarity of section 87A. Someone told that this section has been inserted to increase the exemption limit from ₹2,50,000 to ₹3,00,000 as because tax deduction allowed shall be @10% on ₹50,000 which results the tax rebate of ₹5,000.
Nevertheless, this is wrong understanding. Take a simple example of a senior citizen i.e. resident individuals of the age of 60 years or more but less than 80 years. Accordingly, they would not have got the benefit of section 87A as the exemption limit for them is already ₹3,00,000.
But, this is not the case, the resident senior citizen shall also get the rebate u/s 87A of the Income-tax Act, 1961.
2) No ITR Filing due to Section 87A:
There is another misunderstanding that tax payers whose total income does not exceed ₹3,00,000 shall not file their ITR. Please, this is very big misinterpretation of section 87A to relate it with filing return of income.
This is because ITR is required to be filed if the total income exceeded the maximum amount which is not chargeable to income-tax. On the other hand, the rebate u/s 87A shall be given to those resident individuals whose total income does not exceed ₹5,00,000.
Thus, only resident individuals of the age of 80 years or more at any time during the previous year shall not get the benefit of rebate under section 87A as the exemption limit for them is already ₹5,00,000.
3) Claim Refund up to INR 5000:
One of our visitors asked me the procedure for claiming refund under section 87A of Income Tax Act after filing ITR. Actually, his tax liability would be ₹3800 for the assessment year 2017-18.
Note that the rebate under section 87A i.e. the amount of relief would be the tax payable or ₹5,000, whichever is less. Hence, if your computed income-tax on total taxable income is ₹3800, you are not required to pay tax.
However, you have to file your ITR within due date and rebate shall be claimed while filing the return just before adding the Education Cess, Secondary and Higher Education Cess.
But, you are not allowed to claim a refund after filing ITR for the balance amount i.e. ₹1200 (5000-3800). In other words, even if the total tax liability is less than five thousand rupees there will not be any entitlement for claiming the refund.