Rebate under section 87A

Section-87A of the Income Tax Act, 1961 allows a tax rebate to individual small taxpayers. It is introduced to encourage the individual small taxpayers to file income tax return. In this article, you will get a complete information about rebate under section 87A for individual taxpayers.

Section-87A states as follows: “An assessee, being an individual resident in India, whose total income does not exceed Rs. 5,00,000, shall be entitled to a deduction, from the amount of income-tax (as computed before allowing deduction under this chapter) on his total income with which he is chargeable for any assessment year, of an amount equal to 100% of such income-tax or an amount of Rs. 12,500, whichever is less.”

What is rebate under section 87A?

Tax rebate is an additional deduction to the taxpayer from their tax amount up to or equal to a specific tax amount. Tax rebate is allowed for the individual taxpayers after all income tax calculation rather than a deduction from the total income.

Rebate under section 87A was first introduced in the finance bill 2013, which was further amended in the year 2017. Previously, the amount of tax rebate was Rs. 2,500 which has been further amended in Budget 2019. Now, from FY 2019-20 (A.Y. 2020-21), the individual taxpayers shall be allowed a rebate of income tax of maximum amount up to Rs. 12,500.

According to this section, if the individual taxpayer has a total income of up to Rs. 5 Lakhs after all deductions, he could claim tax rebate of 100% of the tax amount or Rs. 12,500 whichever is less.

Who is entitled to rebate under section 87A?

• All individual taxpayers (whether male or female) can avail the benefit of rebate u/s 87A.
• Senior citizens (above the age of 60 years and below 80 years) are also eligible for rebate u/s 87A.
• Only Resident individual taxpayers can take benefit of section 87A. Non-resident individual taxpayers are not eligible for rebate u/s 87A.
• Partnership firms, LLP, HUF, Companies etc. are not eligible under section 87A.
• The tax rebate allowed u/s87A shall be limited to a maximum amount up to 100% of tax or Rs. 12,500 whichever is less.
• Thus, the benefit of section 87A is not available to those taxpayers who have total income exceeding Rs. 5 Lakhs.

Note: If the total income of the individual is more than Rs. 5 Lakhs (after all deductions), he will not be eligible for rebate u/s 87A. In this case, he shall be liable to pay tax on the basis of tax slab as follows: -

• Up to Rs. 2.50 Lakhs: -                                          Nil
• Above Rs. 2.50 Lakhs upto Rs. 5 Lakhs: -           5%
• Above Rs. 5 Lakhs upto Rs. 10 Lakhs: -              20%
• Above Rs. 10 Lakhs: -                                             30%

For senior citizens, ‘nil’ tax slab is available up to income of Rs. 3,00,000. If their income exceeds Rs. 3,00,000, they are supposed to pay tax @ 5% up to income of Rs. 5 Lakhs.

How to calculate rebate u/s 87A?

Herein this table, you can see the manner of calculation of rebate u/s 87A for FY 2019-20 [AY 2020-21]:

Past rates of rebate u/s 87A

When introduced in F.Y. 2013-14, the tax rebate initially allowed was Rs. 2,500 which has been drastically increased to Rs. 12,500 over the years. Given below are the past rates of rebate u/s 87A in this table: