Calculate Rs 2500 Tax Rebate Sec 87A Income Tax Act

Calculating Rs 2500 Tax Rebate Section 87A of Income Tax from 2017-18 - Clarifications -  The Tax Rebate which was earlier Rs 5000 has been reduced to Rs.2500 for FY 2017-18 from AY 2018-19. w.e.f. 1.4.2018. In the Budget Speech, it has been proposed to raise the Tax Rebate to Rs. 2500.
Income Tax Rebate Changed to Rs 2500 : The income tax rebate is changed to Rs 2500. In the FY 2017-18, it was Rs 5000, now the tax rebate is Rs 2500. This rebate is available to those whose taxable income is below 3.5 lacs.

Calculate Rs 2500 Tax Rebate Sec 87A Income Tax Act

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.2500 is announced for the Individuals having Income between Rs.2,50,000  Rs.3,50,000. 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.3,00,000 and basic exemption limit is raised ?  Let us discuss some important points on availing rebate with reference to the Income Tax Act 2017-18 and Finance Minister's Financial Budget speech.

Calculating Rs.2500 Tax Rebate under Sec 87A of Income Tax Financial Act

As per the Budget Speech and from Income Tax Officials Clarifications the Tax Rebate is as follows:
REBATE OF Rs 2500 FOR INDIVIDUALS HAVING TOTAL INCOME UPTO Rs 3.5 LAKH [SECTION 87A]
A resident individual (whose net income does not exceed Rs. 3,50,000) can avail rebate under section 87A. It is deductible from income-tax before calculating education cess. The amount of rebate is 100 per cent of income-tax or Rs. 2,500, whichever is less.  The amount of rebate available under section 87A is Rs 2500/- or the amount of tax payable, whichever is less from AY 2018-19.

Actually 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 from AY 2018-19:
  1. This Sec 87A Rebate of Rs.2500 is applicable to Individuals Indian Male and Female Residents only.
  2. Basic Exemption Limit has not been increased. (Rs. 2.5 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.3,50,000
  4. This Section 87A is w.e.f 1.4.2018 means, it is applicable from Assessment Year 2018-19, means for those who are filling their Income Tax Returns for the Financial Year 2017-18.
  5. Tax Rebate is applicable to Senior Citizens up to 80 Years of age only.
  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.3,50,000 then you are to eligible claim a Rebate of  Rs.2500). details at www.apteachers.in
  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.2500 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. 2500, whichever is less.
  11. After deducting the Rebate, pay the tax after calculating the education cess,  That's it.
Model Calculation of Rs.5000 Rebate in Income Tax as per Section 87A
  1. Let us assume that Your Gross Income is Rs.4,80,000
  2. Let All Deductions and Exemptions is Rs.1,50,000. Then your total Income after applying all eligible deductions is Rs.3,30,000.
  3. Hence, Now the Net Taxable Income will become Rs.3,30,000.
  4. Now, applying 5% Tax on Rs.80,000 (Rs.3,30,000 - Rs.2,50,000) will be Rs.4000.
  5. As the Taxable Net Eligible Income is Less than Rs.3,50,000, apply Tax Rebate u/s 87A upto a Max of Rs.2,500.
  6. Hence Tax is Rs.4,000 - Rs.2,500 = Rs.1,500.
  7. Add Education Cess, Higher and Secondary Education Cess 3%  on Rs.1,500 and Pay the Tax.

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