spatel (Engineer) (68 Points)
15 July 2025I am calculating tax and found few strange things.
As per my understanding for AY 2025-26 and new regiem 7,00,000 limits for 0 tax or say we can claim 87A rebate.
Now suppose
Case 1:
Salary : 700000
Interest Amount : 100000
Tax Payable is : 22500 + Cess
Here no rebate.
Case 2:
Salary : 700000
Interest Amount : 95000
Tax Payable is : 20000
Now in this calculation income tax site display 87A rebate of 2000.
Why ?
Rama chary Rachakonda
(Master in Accounts & high court Advocate)
(8613 Points)
Replied 15 July 2025
The key difference between the two cases is the interest amount. In case 1, the interest amount is Rs.1,00,000, while in Case 2, it is Rs.95,000. This difference affects the total taxable income.
Section 87A Rebate:
The section 87A rebate is a tax rebate available to individual taxpayers whose total taxable income does not exceed Rs.5,00,000. The rebate is calculated as the lower of :
Rs.12,500 (for taxable income upto Rs.5,00,000)
100% of the tax payable
Why 87A Rebate is not applicable in Case 1;
In Case 1, the tax payable is Rs.22,500 + cess, which exceeds the maximum rebate amount of Rs.12,500. Therefore, the 87A rebate is not applicable.
Why 87A Rebate is appliable in case 2:
In Case 2, the tax payable is Rs.20,000, which is less than the maximum rebate amount of Rs.12,500. Since the taxable income is below Rs.5,00,000, the 87A rebate is applicable , and the taxpayer is eligible for a rebate of Rs.2,000.
Sreevidhya V
(430 Points)
Replied 15 July 2025
That is because of maximum marginal relief
In the second scenario, income exceed 7 lacs by Rs.20000/- But tax payable on that works out to Rs.22000/- so the tax payable exceeds income above 7 lacs by 2000.
so 87A restricts the tax payable to the amount by which it exceeds 7 lacs, which is called maximum marginal relief.
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