- 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.
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|
|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|
|Less- Rebate U/s. 87A (Actual tax or Rs. 2,000/- whichever is lower)||2,000|
|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/-