What is 87A in Income Tax?

Wondering what is 87A in income tax. Section 87A of the Income Tax Act, 1961, provides for a tax rebate to individual taxpayers, specifically aimed at providing relief to low and middle-income taxpayers.

What is Section 87A of Income Tax?

Here's what you need to know about Section 87A:

As per Section 87A, individual taxpayers are eligible for a tax rebate if their total income does not exceed a specified threshold. The rebate amount is limited to the lesser of the following;

• Rs. 12,500: This is the maximum rebate amount available under Section 87A. If the total tax payable by the taxpayer is less than Rs. 12,500, the rebate will be restricted to the amount of tax payable.

• Actual tax payable: The rebate amount is limited to the total income tax payable by the taxpayer. If the tax payable is less than Rs. 12,500, the rebate will be limited to the amount of tax payable.

• The rebate under Section 87A is available only to resident individuals (including senior citizens and super senior citizens) whose total income does not exceed the specified threshold.

• For the assessment year 2022-23 (financial year 2021-22), the threshold limit for availing the rebate is Rs. 5 lakhs. This means individuals with a total income of up to Rs. 5 lakhs are eligible for the rebate.

• To calculate the rebate under Section 87A, first, compute the total tax payable by the taxpayer based on the applicable income tax slabs and rates.

• Then, apply the rebate amount (limited to Rs. 12,500 or the actual tax payable, whichever is lower) to arrive at the net tax payable by the taxpayer.

• The rebate under Section 87A is applicable at the time of filing the income tax return. Taxpayers can claim the rebate while computing their tax liability for the relevant assessment year.

• The rebate under Section 87A is not available to taxpayers whose total income exceeds the specified threshold limit, which is Rs. 5 lakhs for the assessment year 2022-23.

• The objective of Section 87A is to provide relief to individual taxpayers with lower income levels by reducing their tax liability.  

This is all about what is 87A in income tax.

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