Contact

Amendment of section 87A (Rebate) of Income-Tax Act,1961 (w.e.f FY 2019-20)

An assessee, being an individual resident in India, whose total income does not exceed Rs. 500,000/-, shall be entitled to a deduction, from the amount of income-tax computed on his Taxable Total Income, ie, after Chapter VIA deduction, an amount of income tax computed or Rs. 12,500/-, whichever is less.

Previously for AY 2018-19, the rebate was only Rs. 2,500/- which availed by individuals whose total taxable income is less than Rs. 3,50, 000/-. This has reduced the tax burden of an individual drastically. This is one of most beneficial change in provisions of Income tax Ac 1961, for taxpayers whose total income is less than Rs. 5,00,000/-

A brief explanation is given here under for better understanding:

You can claim tax rebate under this provision if you satisfy the following conditions:

  1. You must be a Resident Individual; and
  2. Your total Income, less deductions is equal to or less than Rs 5 Lakhs.

The rebate is limited to Rs. 12,500. This means that if the total tax payable is lower than Rs. 12,500, then the whole amount will be the rebate under section 87A. This rebate is applied to the total tax before the Education Cess (4%).

Here are the few instances:

Net Taxable Total Income

Tax payable before cess

Rebate u/s 87A

Payable + 4% Cess

2,80,000

1,500

1,500

-

3,70,000

6,000

6,000

-

5,00,000

12,500

12,500

-

5,00,500

12,600

-

13,104



So, from the above instances we can notice that if the total income of the person is more than Rs. 5,00,000/- even by few hundreds, then he will not be able to avail this benefit and will be liable to pay tax on the whole amount as per the current income tax slab rate.

Conclusion:

Therefore, for those persons who are earning income above Rs. 500,000/- can plan in such a way that they can avail the benefits of Rebate available u/s 87A by making investments which are eligible for deduction as per Chapter VIA of Income tax Act 1961.