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Section 87A of the Income Tax Act, 1961 was introduced in Finance Act, 2013 to give benefit to a large number of people whose net total income is less than Rs. 5,00,000/-. The rebate under this section is available to resident individuals from A.Y. 2014-15. The rebate available is maximum of 1) 100% of tax payable on total income or 2) Rs. 2,000/-.

As per section 192 (2A), while calculating the taxable salaries, employer should consider the relief under section 89(1) if at all it is available to the employees subject to Rule 21AA and furnishing of Form 10E. However, at the time of introducing rebate under section 87A or even later, provisions of section 192 are not amended in this respect to cover this rebate. Meaning there by is looking to the current provisions of Section 192, employers can not consider rebate u/s 87A and have to make TDS from the salaries of the employees without giving effect of such rebate benefit. The employees will have to ask for refund of such excess amount of TDS by taking benefit of rebate while filing the return of income.

It is noticed most of the accounting and return filing softwares have made amendments in their programming to give benefit of this rebate while calculating TDS from Salaries. This may result in short deduction of tax at source to the extent of rebate calculated. The provision of section 192 has to be amended to include rebate u/s 87A while calculating taxable salary to avoid unnecessary litigations.

As most of the employers all over country would have considered this rebate as mentioned above by default (due to TDS calculation of softwares), it may happen that CBDT amends the provisions with retrospective effect or issue instructions internally to avoid litigations on this base.

CA Neil Ganatra

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