The Budget 2023-24 has increased the rebate offered under Section 87A from the current income level of Rs 5 lakh to Rs 7 lakh under the new tax regime. According to new provision, individuals opting for the new income tax regime with an income of up to Rs 7 lakh will not pay any taxes. In other words, from assessment year 2024-25 onwards, the entire income of an individual resident in India will be exempted from paying tax if his income does not exceed Rs 7 lakh.
Rebate under Section 87A on income explained
Section 87A of the Income Tax (I-T) Act helps you lower your taxes. Taxpayers can claim rebate us 87A if their annual income, after Chapter VIA deductions, does not exceed Rs 7 lakh. Chapter VI A of the I-T Act offers deductions specified from Section 80C to Section 80T.
Section 87A
Introduced in the Finance Act 2003, Section 87A offers relief to taxpayers earning an income up to a certain level – Rs 7 lakh. However, relief under Section 87A is offered only to individuals residing in India.
Section 87A: Eligibility
- You must be an individual, which means HUFs cannot claim rebate u/s 87A.
- You should be a resident of India. Section 87A benefits are not available for NRIs.
- While senior citizens aged between 60 and 80 years can avail of the rebate us 87A, super senior citizens aged over 80 years are not eligible to claim this benefit.
Rebate us 87A
Under the new tax regime, an annual income of up to Rs 7 lakh has been exempted from income tax in India under 87A. Section 87A entitles a resident individual to claim tax rebate of up to Rs 12,500 against his tax liability, in case his income is limited to Rs 7 lakh. Once you start earning an income which is over Rs 7 lakh, you will have to forgo the benefit offered by Section 87A rebate.
The rebate under Section 87A for AY2022-23 is Rs 12,500.
See also: Everything a taxpayer needs to know about old and new income tax slab
Rebate under Section 87A: Applicability
The applicability of Section 87A is based on your I-T liability to be calculated. You arrive at this income after factoring in all the deductions offered from Section 80C to Section 80T as part of Chapter VIA, and after setting off any previous loss in income.
What kind of incomes rebate us 87A can be claimed?
- Regular income.
- Short-term capital gain made on sale of listed equity shares and equity-oriented schemes of mutual funds.
- Long-term capital made through sale of capital assets and equity-oriented schemes of mutual funds. Rebate us 87A is not applicable on sale of listed equity shares.
How to claim rebate us 87A in 5 steps?
- Write down your gross total income for the financial year.
- Factor in deductions offered under Section 80C and 80T and deduct the amount.
- Write down your income after tax deductions.
- Mention your gross income after tax deductions in your ITR.
- Claim a tax rebate us 87A in case your total income is within the Rs 7 lakh-bracket.
See also: All about deduction under Section 24
Rebate us 87A: Financial year-wise
| Financial year | Limit on total taxable income | Rebate us 87A |
| 2022-23 | Rs 5 lakhs | Rs 12,500 |
| 2021-22 | Rs 5 lakhs | Rs 12,500 |
| 2020-21 | Rs 5 lakhs | Rs 12,500 |
| 2019-20 | Rs 5 lakhs | Rs 12,500 |
| 2018-19 | Rs 3.50 lakhs | Rs 2,500 |
| 2017-18 | Rs 3.50 lakhs | Rs 2,500 |
| 2016-17 | Rs 5 lakhs | Rs 5,000 |
| 2015-16 | Rs 5 lakhs | Rs 2,000 |
FAQs
How is rebate us 87A calculated?
Rebate under Section (us) 87A can be calculated by following the given steps: Calculate your total income for the financial year. Deduct the rebate offered under Section 80C to Section 80T. Deduct any previous loss of income you want to carry forward. Claim 87A rebate if your total income is up to Rs 7 lakh.
Who is eligible for rebate us 87A?
Resident individuals are eligible to claim rebate under section 87A.
