Calculating Rs.2000 Tax Rebate Sec 87A of Income Tax Act-Clarifications

Calculating Rs.2000 Tax Rebate Sec 87A of Income Tax Act - Clarifications. As per the Income Tax Financial Act 2013-14, the new Section 87A is introduced w.e.f. 1.4.2014. It is a big relief as the Rebate of Rs.2000 is announced for the Individuals having Income between Rs.2,00,000  Rs.5,00,000. Now there are lot of doubts on how to avail the Rebate from Income Tax. Some are asking that whether the Basic Income Limit for Individuals has raised to Rs.2,20,000 and basic exemption limit is raised ?.  Let us discuss some important points on availing rebate with reference to the Income Tax Act 2013-14 and Finance Minister's Financial Budget speech.

Calculating Rs.2000 Tax Rebate under Sec 87A of Income Tax Financial Act

The Rebate Rs.2000 under Sec 87A is inserted  after the Sec 87 of the Income Tax Finance Act 2013 and is as follows:

87A. [Omitted by the Finance (No. 2) Act, 1967, w.e.f. 1-4-1968.]
The following section 87A shall be inserted after section 87 by the Finance Act, 2013, w.e.f. 1-4-2014 :
Rebate of income-tax in case of certain individuals.
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.

Clarifications on Sec 87A:
  1. This Sec 87A Rebate of Rs.2000 is applicable to Individuals Indian Male and Female Residents only.
  2. Basic Exemption Limit has not been increased. (Rs. 2 Lakh for Below 60 Years More Detailed particulars Click Here)
  3. This Relief is applicable to all Individuals only if the Total Income is less than Rs.5,00,000
  4. This Section 87A is w.e.f 1.4.2014 means, it is applicable from Assessment Year 2014-15, means for those who are filling their Income Tax Returns for the Financial Year 2013-14.
  5. Tax Rebate is also applicable to Senior Citizens upto Rs. 5,00,000 Income.
  6. First Calculate the Total Taxable Income after making all Possible and eligible Deductions from your Income. ( If the Total Taxable Income is Less than Rs.5,00,000 then you are to eligible claim a Rebate of  Rs.2000).
  7. From the previous step, we get  The Income liable to Tax at Normal Rates.
  8. From the Income Liable to Tax, Calculate the Income Tax.
  9. Now Deduct Max of Rs.2000 as Rebate.
  10. Means It is deductible from income-tax before calculating education cess. The amount of rebate is 100 per cent of income-tax or Rs. 2,000, whichever is less.
  11. After deducting the Rebate, pay the tax after calculating the education cess,  That's it.
Model Calculation of Rs.2000 Rebate in Income Tax Act 2013 as per Section 87A
  1. Let us assume that Your Gross Income is Rs.400000
  2. All Deductions and Exemptions is Rs.100000 and Your Total Income after applying all eligible deductions is Rs.3,00,000.
  3. Hence, Now the Net Taxable Income will become Rs.3,00,000.
  4. Now, 10% Tax on Rs.1,00,000 (Rs.3,00,000 - Rs.2,00,000) will be Rs.10,000.
  5. As the Taxable Income is Less than Rs.5,00,000, apply Tax Rebate u/s 87A upto a Max of Rs.2,000.
  6. Hence Tax is Rs.10,000 - Rs.2,000 = Rs.8,000.
  7. Add Education Cess, Higher and Secondary Education Cess 3%  on Rs.8,000 and Pay the Tax.

52 comments:

  1. Now I understand the details in 87-A section in IT act. So far I am confusing how to deduct the rebate of Rs.2000/-. Thanks!

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  2. I have found this article is very informative. at the same time you can visit section 87a of income tax act to get more details.

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  3. If the net taxable income is Rs. 2,19,999/-
    10% of Net Taxable Income would be 1,999 (2,19,999-2,00,000).
    Less Special Rebate U/s 87A means 1999-2000 = -1
    Do this formula apply ?
    Can the individual be exempted from Tax payment ?

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    Replies
    1. Sir, Herein we need to take note that the Net Taxable Income is always and as a rule taken in multiple of ten or alternatively rounded of the next tenth unit. Thanks

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  4. Got the answer too.. The rebate shall be restricted to 1999 in that case...

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  5. thanks.my doubt is this applicable to all individuals or only individuals with salary + other sources income. There is no clarity on this i suppose.

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    Replies
    1. This is applicable to all individual residents of India.

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  6. My total salary is 550000 less 80c deduction then I got the redate of 87a

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    Replies
    1. no this is only up to 500000

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    2. The Clarifications and the reply of CR Meena is confusing the whole thing. In case of Shri Ajit Singh, his total Salary is Rs 550000. After the maximum deduction under section 80 C, i.e.. Rs 100000/-, taxable income will come down to Rs 450000. So as per the clarification shown above, Shri Singh is illegible for rebate u/s 87 A. Kindly clarify. Also, a model calculation for those having Total Salary more than Rs 500000, should have been shown, to clear doubt.

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    3. If the Total Income after deductions under chapter vi is less than Rs.5Lakh then Rs.2000 rebate under sec 87a can be applied. Dear Subhasish Bhattacharjee, as per your calculation after allowing the deductions your total income is 4,50,000. hence you can claim rs.2000 tax rebate. No doubt in it.

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  7. The information available here is very useful

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  8. me may get children allounce rebate any please tell me

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  9. can i get children allounce rebate in income tax

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  10. after joining 2004 they are paiing NPS 10+10 both deduction are taxable or not

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    Replies
    1. Do you show employer 10% part of pran deduction in your salary statement then yes otherwise no

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  11. can rebate available from tax on causal income also? if assessee is having income by way of winnings from lottery Rs, 10000 then rebate is available or not ?

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  12. Hai zakir..sir...u have given a valuable information
    to all our employees.thanks a lot...

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  13. If taxable income is Rs 400000 excluding agricultural income of Rs 200000. whether the assesse will be eligible for exemption u/s 87A?

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  14. Sir I would like to konw that suppose my tax payable before rebate u/s 87A is 5000 but my prepaid taxes amounts to 12000, in this case will i be eligible for Rebate u/s 87A

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    Replies
    1. You mean u have paid tax as tds Rs 12000 before rebate of rs 2000. If yes file itr with refund demand

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  15. My taxable income is 219450 and i didnot have a pan card .
    Do i want to pay tax. Because a person with out pan card tax will be 20%

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  16. Hi,
    From the Company point of view, TDS has to be deducted after considering Rebate of Rs.2000 and then deduct TDS or Deduct TDS and claiming for refund

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  17. VERY USEFUL INFORMATION,,THANX TO YOU ALL.

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  18. Dear Experts...Please let me know if some one doing a job in pvt ltd company from last 16 years..and his education qualification matriculation only...so as per the govt rules as well as education qualificartion what would be the basic salary..

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  19. Very Simple to understand and very useful

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    Replies
    1. Sir
      i want to know that whether the total income is total taxable income or total income without deductions. Also, the person involved is salaried employee only or have other incomes also. Reply as early as possible

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  20. If GTI is 315000, and deduction u/s 80 c is 100,000 the taxable income is 15,000, now if I have to deduct TDS, do I provide rebate of u/s 87A, Rs. 1500 in this case and not deduct TDS.

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  21. what about tax rellief u/s 87A on casual income.. if i have 250000 salary and 50000 lottery income.. how does 87A work then ??
    in addition to the above if i have long term capital gain of rs. 25000 and short term capital gain u/s 111A of another Rs. 25000/- then ??
    clarification point 7 says that income liable at normal rates to be seen.. pls clarify above type of income in connection to 87A

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  22. My annual income is below Rs. 5 lakhs. I have taken a housing loan and have availed tax benefits on it. But still I have paid Rs. 1388/- income tax which was deducted at source by my employer. Can I claim refund of this amount u/s 87A.

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    Replies
    1. no you cannot claim refund as the exemption is Rs. 2000 or tax applicable whichever is lower.

      Gourav Goyal

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    2. This comment has been removed by the author.

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    3. Yes you can take refund. If tax liability before cess and Chapter VIII (which includes sec 87A) is greater than 0, then 100% of tax OR 2000 (whichever is lower) shall be allowed as deduction and if paid any amount as TDS before claiming deduction u/s 87 A then claim it by filing ITR and get refund. Also Gaurav Goyal sir TDS does not decreases the Tax Applicable but reduces the Tax Payable only

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  23. Sir, my Income is Rs. 6,40,000/- and interest on Housing Loan is Rs. 1,50,000/-. can i deduct my interest amount from my income for rebate of Rs. 2000/-u/s 87.

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  24. Sir, my total salary Rs. 510674/-
    add perquisites Rs. 0/-
    add profits Rs. 0/-
    Less Section 10 Rs. 1200/-
    Gross Salary Rs. 509474/-

    Less Prof Tax (-) 2500/-

    Total Taxable Income Rs. 506974/-
    Less HBA Int. 78568/-
    Gross Total Income Rs. 428406/-

    Where I am iligible for rebate of Rs. 2000/- u/s 87A

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  25. This comment has been removed by the author.

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  26. Sir,as per this we deducted TDS on salary ex-after all deduction salary is 300000 means I have to deduct 10000 tds but concidering this we deducted 8000 + cess. now doubt is taht how to show in 4th q TDS return there is no option for exemption u/s 87 in rpu file

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  27. I have the same query which Mr Mahesh asked. How to file etds return with no column for rebate u/s 87A.

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  28. what is the difference between the total income and taxable income? the 87 A says 'if the total income is below 5,00,000/- the rebate can be allowed. but you are saying to calculate the taxable income and if the taxable income is less than 5,00,000/- the rebate can be allowed. there is some confusion here. should rebate be from the total income or taxable income?

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  29. My Gross income is 645000; After allowing deductions under Sections 80C, 80D, 80G etc., I have a taxable income of Rs.500093. I presume, I am not eligible for 87A deduction. This creates an anamoly. A person getting 499999, gets the rebate of Rs.2000 whereas one who gets 500001, will not. Earlier such people who came in such brackets nearer tothe slab were allowed some benefits. Do such things exist now? Kindly clarify

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  30. In case of senior citizen the basic exemption limit is 250000/- . Does this rebate of 2000/- is still applicable there . For eq : If senior citizen taxable income is 300000/- then what shall be the calculation

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  31. the question about the which the tax is less than 2000 will be exempted or not? for ay 2014-15
    for example : GROSS TOTAL INCOME OF RS.210000
    LESS:DEDUCTIONS U/S80C RS NIL
    NET TAXABLE INCOME RS 210000
    TAX PAYABLE THERE ON RS 1000
    LESS REBATE U/S87A RS 2000


    IN THIS CASE THE ASEESEE SEF ASSESSMENT TAX PAID IS RS NIL / WE SHOULD INDICATE WITH BALANCE FIGURE OF DIFFERENCE ARRIVED -1000 PLEASE CLARIFY MY DOUBT REGARDING THIS ISSUE

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    Replies
    1. We file income tax return at a nominal charges of 100 INR. Please contact on +91995805701

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  32. Please let me know...How to get Sec 87A benifit? & Where we have to fill that? Because, there's no column for that in e-File form.

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  33. Nice Article in very simple language. For more clarifications/info, anyone can visit my article dated 02-03-2013!!!
    http://taxguru.in/income-tax/87a-income-tax-creditrebate-rs-2000-faq.html

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  34. is 87(a) applicable or the assessment year 2015-16 ie tax calculation for 2014-15

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