Section 87A was introduced in Finance Act 2013 by Honorable Finance Minister P. Chidambaram. This was applicable from 01.04.2013 for A.Y. 2014-15
87A. An assessee, being an individual resident in India, whose total income does not exceed five hundred 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 rupees, whichever is less.
Sec. 87A provides deduction to the extent of:-
- Rs.2000 or
- an amount equal to the tax(before cess), whichever is lower
up to the taxable income of Rs.500000.
This section is applicable only to individual resident and ordinary resident. This mean a non-ordinary resident and a non-resident is not allowed such deduction u/s 87A.
No rebate is applicable for super senior citizens (age more than 80 years) as tax upto income of Rs.500000 is exempt to such individuals.
No rebate is provided to assessee other than individuals. HUFs, Firms, Companies are not allowed deduction under this section.
P Chidambaram in his budget speech mentioned that “I am inclined to give some relief to the tax payers in the first bracket of Rs 2 lakh to Rs 5 lakh. Assuming an inflation rate of 10 percent and a notional rise in the threshold exemption from Rs 2,00,000 to Rs 2,20,000, I propose to provide a tax credit of Rs 2,000 to every person who has a total income upto Rs 5 lakh. 1.8 crore tax payers are expected to benefit to the value of Rs 3,600 crore.”
Hence, it can be said that instead of increasing the tax bracket which would lead to thousands of tax payer out of net, he proposed to provide with a deduction
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