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As per the Section 87A of the Income Tax Act, 1961:

An assessee, being an individual resident in India, whose total income does not exceed [three lakh fifty 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 [two thousand and five hundred] rupees, whichever is less.

On the basis of above readings let’s answer a few of the frequently asked questions:

Who can avail or claim the rebate under section 87A–FY 2017-18 (AY 2018-19) and FY 2018-19(AY 2019-20)?

An individual who is resident in India and whose total income does not exceed Rs. 3,50,000 is entitled to claim rebate under section 87A.

In simple words, following three mandatory conditions are required to be satisfied if an assessee wishes to claim rebate under section 87A:

  • Assessee must be a Resident of India;
  • Assessee must be an Individual Assessee, therefore, relief u/s 87A is not available to a Company, AOP, BOI, Trust, Firm or even HUF
  • Total Income (after claiming deduction under section 80C to 80U) is equal to or less than Rs. 3,50,000

Please note that there will be no benefit of this rebate u/s 87A to a super senior citizen i.e. an Individual of age 80 and above as their Income up to Rs. 5,00,000 is already exempt. But the benefit can be easily claimed by a Senior Citizen i.e. an Individual of an age of 60 and below 80 years.

To learn more about your resident status - Recommended Read - Residential Status - Am I Resident or Non-Resident?

What is the amount for which relief under section 87A can be claimed for FY 2017-18 (AY 2018-19) and FY 2018-19 (AY 2019-20)?

The amount of income tax rebate available under section 87A of the Income Tax Act, 1961 will be lower of the following:

  • 100% of the Income Tax Liability; or
  • Rs. 2,500.

In other words, we can say where the Income Tax Liability calculated is more than Rs. 2,500 in such cases rebate will be available up to the amount of Rs. 2,500 only.

The rebate is applicable on the total tax before charging Education Cess at a rate of 4%.

However, in case of FY 2017-18 (AY 2018-19), the Education Cess shall be 3% instead of the new rate of 4%.

Following is an illustrated example of the income tax rebate under section 87A for FY 2018-19 (AY 2019-20):

Total Income

Tax payable before cess

Rebate under section 87A

Tax Payable + 4% Cess

2,75,000

1250

1250

0

3,00,000

2500

2500

0

3,50,000

5,000

2500

2500+100

4,00,000

7,500

0

7,500+300

Provision before Union Budget 2017 i.e for the FY 2016-17 (AY 2017-18) and earlier:

FY

AY

Amount of Maximum Rebate u/s 87A

Only if Income is less than

2016-17

2017-18

5000

500000

2017-18

2018-19

2500

350000

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Category Income Tax, Other Articles by - Prajjwal Kaushik 



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