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Introduction:

The paramount objective of any nation’s government is to prioritize the welfare of its citizens. Achieving this goal necessitates financial backing, which is why governments collect taxes from eligible citizens. Section 87A of the Income Tax Act, 1961, stands as one such provision designed to assist taxpayers in reducing their income tax liability. Individuals well-versed in budgetary matters are likely familiar with the concept of rebate, particularly under Section 87A. For those unacquainted, detailed information regarding this rebate is provided below.

Income Tax Rebate Section 87A:

• The income tax rebate provided by Section 87A offers relief to taxpayers falling within the 10% tax bracket. Eligibility for this rebate extends to individuals with an annual net income not exceeding Rs. 5 lakh as per the Income Tax Act, 1961. This implies that an individual can claim a rebate of up to Rs. 2,000 on their taxes. Consequently, the deduction will amount to either Rs. 2000 or 100% of the individual’s salary, whichever is lower.
• Another significant aspect of Section 87a Income Tax Act is its applicability exclusively to individuals, excluding Hindu Undivided Families, BOI/AOP, companies, or any other form of firm. Additionally, the total rebate amount must not surpass the calculated income tax before deductions on the individual’s total income for the assessment year, determining the chargeable amount.

Eligibility Criteria: 

Below are key points outlining the eligibility criteria for claiming the 87A tax rebate:

• This section does not impose gender-based restrictions, meaning both men and women can equally benefit from its provisions.

• The rebate is exclusively available to individual taxpayers. If you are a member of a Hindu Undivided Family (HUF) or seek it for your firm or company, this rebate is not applicable.

• The net taxable income of an individual must not exceed Rs. 5,00,000 to qualify for the rebate.

• According to the law, individuals can avail a maximum rebate of INR 12,500 under this section. In summary, if your tax liability amounts to INR 12,500 or less, you are eligible to claim this rebate.

Here are some calculations illustrating the Section 87A rebate for resident individuals below 60 years of age across different income levels:

Income slab (Rs)	Tax payable before cess (Rs)	Rebate u/s 87A (Rs)	Tax payable+4%cess (Rs)
2,70,000	1000	1000	0
3,60,000	3000	3000	0
4,90,000	12000	12000	0
12,00,000	172,500	0	1,79,400

Steps to Claim Tax Rebate: 

• Calculate the gross total income for the year.

• Reduce the tax deductions for tax savings, investments, and much more.

• Calculate your total income after tax deductions.

• Report your gross income and tax deductions in your Income Tax Return (ITR).

• Claim tax rebate under Section 87A if your income does not exceed 5 lakhs.

• The maximum rebate under Section 87A for the Assessment Year 2022-23 is Rs 12,500.

Factors to Consider Before Claiming Rebate :

• The rebate can be applied to the total tax amount before incorporating health and education cess.

• Only Indian residents are eligible to avail of the rebate under this section.

• Senior citizens are also eligible to avail of the rebate under this section.

• Individuals aged above 80, known as super senior citizens, are not eligible for this rebate.

• The rebate amount is less than the limit specified under Section 87A.

• This section is applicable under both the old and new tax regimes.

Rebate against  Tax liabilities: 

Section 87A rebate can be claimed for tax liabilities on:

• Regular income taxed at the applicable slab rates.

• Long-term capital gains under Section 112 of the Income Tax Act apply to the sale of capital assets other than listed equity shares and equity-oriented schemes of mutual funds.

• Short-term capital gains on listed equity shares and equity-oriented schemes of mutual funds, taxable at a flat rate of 15%, fall under Section 111A of the Act.

• The rebate Under Section 87a Income Tax cannot be offset against tax on long-term capital gains from equity shares and equity-oriented mutual funds as per Section 112A.

Conclusion: 

The inception of Rebate under Section 87A aimed to offer relief to taxpayers in the lowest tax bracket, allowing the government to extend direct benefits to this demographic without altering overall tax rates. This is evidenced by the frequently changing limits of Section 87A.