Tax rebate in case of resident individual Under Section 87A By CA Sayan Ghosh


Section 87A provides for rebate from income tax  payable by an assessee being an individual resident in india, whose total income does not exceed Rs. 3,50,000. (Before any rebates and reliefs) to the extent of the income tax payable or Rs. 2,500, whichever is lower.

Following amendments has been made in Finance Act, 2019

  • limit of total income is increased to Rs. 5,00,000 instead of Rs. 3,50,000.
  • ceiling of tax rebate is increased to Rs. 12,500 instead of Rs. 2,500.

This amendment will take affect from 01-04-2020.

Effect of amendment:-

The amount of tax rebate would be lower of:-

  • 100% of income tax payable or
  • 12,500

Such rebate will be available before adding surcharge and health and education cess to income tax and in case where income doesn't exceed Rs. 5,00,000.

Following table shows the tax effect pursuant to the said amendment

Resident Individual

If total income is

Amount of tax rebate

Other than super senior citizens

Less than or equal to  Rs. 5,00,000

100% of the tax

  ---------- do -------

Rs. 5,00,001 or more

No rebate allowed

Super senior citizens

Less than or equal to  Rs. 5,00,000

No income tax payable, so no rebate arises.

-------------- do ------------

Rs. 5,00,001 or more

No rebate allowed

Tax rebate is available irrespective of nature of income and the rate at which it is taxable expect long term capital gain ( U/s 112 A).

To understand the amendment let us take an illustration:-

Mr. Jai aged 45 Years has total income( at normal rate) of Rs. 4,90,000 and Mrs. Ghosh aged 34 years has total income of Rs. 5,01,000 for the assessment year 2020- 2021, the tax liability will be calculated as under:-

 

In case of Mr. Jai

In case of Mrs. Ghosh

Tax @ 5% on excess of threshold limit (5,00,000 - 2,50,000)

                -----------------------(I)

Tax @ 20% on excess (5,01,000 - 5,00,000)= 1000*20%

                -------------------------(ii)

 

 

12,500

 

 

Nil

 

 

12,500

 

 

200

Total Tax { I+ii} above

12,500

12,700

Less:- Tax rebate u/s 87 A

12,500 ( 100% Rebate)

0

Net Tax payable

Nil

12,700

Thus, on additional income of Rs. 1,000 (i.e. income in excess of Rs. 5,00,000) tax payable comes to Rs. 12,700.

Click here to read the disclaimer


Write a Comment