Finance Minister Nirmala Sitharaman presented her eighth general budget on Saturday. Under this budget, people earning up to ₹ 12 lakh have been given income tax exemption under Section 87A of the Income Tax Act. Section 87A of the Income Tax Act has been made to give income tax relief to people with low income. So, let us know which taxpayers this section applies to and how it can be availed, but before that let us know what this rule is?
What is Section 87A of the Income Tax Act
Section 87A of the Income Tax Act is an important provision of the Indian Income Tax Act, 1961, under which taxpayers of low and middle income groups are given tax exemption. This exemption is available on their income and not on the total income.
If a person’s income is below a certain limit, he is considered eligible for exemption under Section 87A, which reduces or completely eliminates his tax liability.
Who is eligible for exemption under Section 87A?
To get income tax exemption under this rule, the taxpayer has to fulfill the following conditions:
The taxpayer should be a resident of India.
The total taxable income of the taxpayer should not exceed the prescribed limit.
This rule does not apply to Hindu Undivided Families, companies and firms.
However, the relief is that this rule applies to both the old and new tax regimes, but some conditions are different.
How is tax rebate calculated under Section 87A?
(1) Example of Section 87A rebate in our old tax regime
Suppose your total taxable income is ₹5,00,000.
• Income tax on this: ₹12,500 (as per 5% slab)
• Rebate under Section 87A: ₹12,500
• You are not supposed to pay any tax.
If your income goes up to ₹5,00,001, you will not be eligible for rebate and will have to pay the full tax amount.
(2) Example of Section 87A rebate in our new tax regime
Suppose your total taxable income is ₹7,00,000.
• Income tax on this: ₹25,000 (as per new tax slab)
• Rebate under Section 87A: ₹25,000
• You are not supposed to pay any tax.
If your income goes up to ₹7,00,001, you will have to pay the full tax and will not get the benefit of rebate.
Important Points:
✅ Section 87A rebate is available only to individual taxpayers.
✅ This rebate is applicable only on the taxable income and not on Cess.
✅ If a person’s income exceeds the rebate limit by even ₹1, he will not get the benefit of the rebate.
How to claim Section 87A rebate?
If you are eligible for rebate under Section 87A of the Income Tax Act, then you can claim it while filing income tax returns. For this, you have to do the following:
1. Calculate your total taxable income, either by yourself or with the help of a chartered accountant.
2. Calculate the tax you owe to the income tax as per your eligibility.
3. If you fall under the exemption category, then add the rebate under Section 87A.
4. Check the final tax liability after deducting the rebate.
