Understanding Rebate Under Section 87 A in Income Tax Act 1961

The Income Tax Act of 1961 establishes the many provisions and regulations that govern India’s taxation system. Section 87 A, for example, provides a rebate to individual taxpayers based on their income and tax liability. This article will deal with Section 87 A of the Income Tax Act, 1961 its significance, and how it affects taxpayers.

Contents

Understanding Section 87 A

Section 87 A of the Income Tax Act 1961 went into effect in the fiscal year 2013–2014. The vision of the provision is to give some relief to less-income people. But there are some requirements to qualify for tax credit.

How much is the rebate permitted under Section 87A?

Those individuals with total taxable income which is up to Rs.7 lakh will be qualified for the following tax rebate under the new tax regime for the fiscal year 2023-24, Those are as following:

• 25,000 rupees or the applicable or appropriate tax, whichever is less.
• It is the same as the previous tax structure of Rs.12,500.

Rebate under Section 87A Income Tax, 1961

Calculate your total gross income and subtract deductions from Sections 80C to 80U. If it is less than Rs 5 lakh, you are eligible for a tax rebate, which means that the full tax up to Rs 12500 would be deducted under Section 87A. 

The Section 87A income tax rebate assists taxpayers in reducing their income tax bill. You are eligible to claim the refund provided your total income, after Chapter VIA deductions, does not exceed Rs 5 lakh in a fiscal year. 

In the new tax regime (effective for fiscal year 2023-24), an income tax rebate of Rs 7 lakh has been implemented.

Also, read: Exploring Tax Saving Options Other than Section 80C of the Income Tax Act, 1961

Amount of Rebate

The amount of the income tax rebate under Section 87 A is subject to change based on the Finance Minister’s annual modifications to the Union Budget. The amount of the Section 87A refund for FY 2023-24 (AY 2024-25) has been changed under the new income tax regime. A resident would earn a tax advantage of Rs 25,000 if their taxable income is up to Rs 7,00,000. The former tax structure, which was 12,500 for income up to Rs 500,000, is still in effect.

Procedures for claiming a tax rebate under Section 87A of Income Tax Act, 1961

• Determine your gross total income for the fiscal year.
• Reduce your tax deductions for charitable contributions, investments, and so forth.
• Calculate your total income after deducting your tax deductions.
• In ITR, declare your gross income and tax deductions.
• For Rs 7,00,000 as the taxable income, the residents will get a tax benefit of Rs 25,000. But, as per the earlier tax structure as of Rs 500,000, the tax benefit will be Rs. 25000 as per the new notification. 
• For the fiscal year 2022-23, the maximum reimbursement under section 87A is Rs 12,500.

Implications and Impact

Individual taxpayers face major consequences as a result of the income tax rebate under Section 87 A. It helps low-income people by cutting their overall tax liability. This can result in more disposable income, allowing them more financial flexibility and enhancing their level of living.

Furthermore, the income tax rebate encourages more people to follow tax requirements. By providing tax relief, the government encourages people to pay their taxes on time and prevents tax evasion.

Things to keep in mind while applying for a Section 87A rebate

Also, read: A Guide on How to Save Income Tax in FY 2023-24?

End Note

The income tax rebate offered under Section 87 A of the Income Tax Act of 1961 is critical in decreasing the tax burden on lower-income individuals. By providing this assistance, the government encourages people to comply with tax laws while also increasing their disposable income. While there are several restrictions and complaints, the provision remains an important step toward developing a fairer and more equitable taxation system in India.

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