Section 87A Rebate of Rs 2,000

  1. Section 87A  provides for income tax rebate for RESIDENT individuals who are having total income below Rs. 5,00,000.
  2. Such rebate is also available to Senior citizens (individuals who are 60 to 80 years  of  age).
  3. There is no benefit of such rebate to Super Senior citizens (individuals above the age of 80 years) as their income is already exempt from income tax upto Rs. 5,00,000
  4. This rebate is to be subtracted from total tax payable before adding education cess.
  5. Do note that such rebate is available only to individuals and not to any HUF , LLP’s or companies etc .
  6. Rebate allowed will be is Rs. 2000 or total tax payable (excluding rebate), whichever is lower.

Q. If my gross total income is Rs. 5,50,000/- and I have paid Life Insurance premium of Rs. 50,000/-. Will I be eligible to claim the rebate?

Ans. :- Yes. In this case “ Gross Total Income” is Rs. 5,50,000/- whereas deduction available under Chapter VI (Life insurance premium) is Rs. 50,000/-. Hence your “total income” comes to Rs. 5,00,000/- thereby you can claim the benefit of section 87A.

Eg. Salary income of Miss Komal (age 30 years) is Rs. 4,20,000/- for F.Y. 2014-15. She also received interest from FDRs of Rs. 1,00,000/-. Her investment in PPF is Rs. 1,00,000/- and provident fund Rs. 20,000/-. How much tax is payable by Miss Komal after considering rebate U/s. 87A?

Ans. :- Computation of tax payable of Miss Komal for F.Y. 2014-15-

Particulars Amount (in Rs.)
Income from salary 4,20,000
Income from other sources- FDR interest 1,00,000
Gross total income- 5,20,000
Less- Deductions under chapter VI-A
Contribution to provident fund 20,000
Contribution to public provident fund 1,00,000
Total deductions- 1,20,000
Total Income- 4,00,000
Tax on total income-
Upto Rs. 2,50,000                           NIL NIL
Rs. 2,50,000/- to Rs. 5,00,000/-        10% 15,000
Rs. 5,00,000/- to Rs. 10,00,000/-       20% NIL
Above Rs. 10,00,000/-                      30% NIL
Total- 15,000
Less- Rebate U/s. 87A (Actual tax or Rs. 2,000/- whichever is lower) 2,000
Balance- 13,000
Add- Education & higher education cess (3%) 390
Total tax payable- 13,390

Hence tax payable after considering rebate U/s. 87A is Rs. 13,390/-

From 1st April, 2016, Government has enhanced limit of rebate U/s. 87A to Rs. 5,000/-

Click here to know about new provisions of Section 87A.

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Section 87A Rebate of Rs 2,000
Description
Section 87A provides for income tax rebate for RESIDENT individuals who are having total income below Rs. 5,00,000. Such rebate is also available to Senior citizens (individuals who are 60 to 80 years of age). There is no benefit of such rebate to Super Senior citizens (individuals above the age of 80 years) as their income is already exempt from income tax upto Rs. 5,00,000 This rebate is to be subtracted from total tax payable before adding education cess. Do note that such rebate is available only to individuals and not to any HUF , LLP’s or companies etc . Rebate allowed will be is Rs. 2000 or total tax payable (excluding rebate), whichever is lower.
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