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Section 87A of Income Tax Act 1961 - Rs. 2000 Tax Rebate

Updated on June 29, 2014

Introduction : Section 87A

Section 87A was introduced in the Budget 2013. Section 87 A is Income tax Rebate. It is applicable from Financial Year 2013-14. In other words it is applicable from Assessment year (AY) 2014-2015.

This Rebate is allowed for the assessee whose income is below Rs. 5,00,000/-. This rebate is to be deducted from total tax payable and on total Income. Let's see this section in detail.

What Income Tax says about Section 87A

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.

How to Compute Section 87A

Section 87A is an income Tax Rebate. The taxpayer have to compute the total tax payable. Then the taxpayer have to reduce Rs. 2,000/- from the total tax payable.


If the total tax payable is less than Rs.2,000/- then it should be restricted to that amount. For example if the total tax payable is Rs. 1,610/- , then the Rebate under Section 87A should be Rs. 1,610/- and not Rs. 2,000/-

Computation of Income Tax Rebate under Section 87A
 
 
 
 
 
Heads of Income
Rs.
 
 
Income from Salary
XXX
 
 
Income from House Property
XXX
 
 
Income from Business or Profession
XXX
 
 
Income from Capital Gains
XXX
 
 
Income from other sources
XXX
 
 
Gross Total Income
XXXX
 
 
Less : Deduction under Section 80C to 80U:
XXX
 
 
Net Income
XXX
 
 
Tax Payable
XXX
 
 
Less : Income Tax Rebate U/s 87A
XX
 
 
Tax Payable
XXX
 
 
Add : Education Cess
XX
 
 
Total Tax Payable
XXX
 
 

Above table will give you a clear idea of the computation of Section 87A. Here is a detailed description of the above table.

Computation of Total Income :

First the assesse has to compute the total income. This Total Income comes under 4 heads. They are

1) Income from Salary

2) Income from House Property.

3) Income from Business or Profession

4) Income from Capital Gains

5) Income from Other Sources


After computing the above assesse has to add all the income to get his Total Income. From this assessee has to Deduct any amount if they have under Section 80. Most of the Individual assessees will have Deduction under Section 80C.

After deducting, the assesse will get net Income. Then assessee has to find the Tax payable. Assessee has to apply the Income Tax Slab Rate applicable for the Assessment Year. After applying the rates the assesse will get the Income Tax amount payable.

In this tax payable assessee has to apply his rebate under Section 87A. If the Income returned ( Net Income after deducting Deductions under section 80 ) is less than Rs. 5,00,000/- then the assessee can avail this benefit. If it is more than Rs. 5,00,000/- then the assessee cannot avail this rebate under section 87A.

Important points to be considered under Section 87A

Here are the important points to be noted before calculating Rebate under section 87A :

1) The assesse should be Resident individuals.

2) It cannot be availed for Non-Resident individuals.

3) Rebate is available to Senior Citizens also.

4) To avail this rebate, the assessee's income should not exceed Rs. 5,00,000/-

5) The Rebate of Rs.2,000 is the maximum limit. If the income tax payable is Rs.1,700/- then the Rebate is Rs. 1,700/- and not Rs.2,000/-.

Examples on Section 87A

Let's see some of the examples on Section 87A:

We assume that Assessee has Income from Salary and Income from House Property and he is less than 60 years of age.

Income From Salary 3,15,000

Income from House Property 10,000

Gross Total Income 3,25,000

Less : Deductions under

Section 80: 1,00,000

Total Income 2,25,000

Tax Payable 2,500

Rebate U/s 87A 2,000

Net Tax 500

Education Cess (3%) 15

Total Tax Payable 515


The above illustration will be helpful in understanding the Rebate Under Section 87A. For instance if the total income is more than Rs.5,00,000 ( instead of Rs. 2,25,000 ) then the assessee cannot avail the Rebate under Section 87A.


I hope that this hub will be really helpful to you. Make use of this rebate and save your money and pay your taxes regularly. This article is for educational purpose only. Before filing return consult your tax adviser.

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