Throwing light on income tax rebate under Section 87A
What's the story
India's income tax laws are a labyrinth, but knowing the right sections can save you a lot of money.
One such provision is Section 87A, which provides a rebate to specific taxpayers.
This article breaks down the intricacies of this section, so you can figure out if and how you can take advantage of it.
Eligibility
Eligibility criteria for rebate
In order to be eligible for the Section 87A rebate, an individual must be a resident of India and have a total income of ₹500,000 or less after deductions under Section 80C to 80U are applied.
This relatively high threshold makes the rebate available to a large portion of the population, providing significant tax relief to those who qualify.
Rebate amount
Amount of rebate available
The quantum of maximum rebate under Section 87A is ₹12,500.
So, in case the total tax before cess is less than ₹12,500 for an individual with a net taxable income of up to ₹500,000, the individual would not pay any tax i.e. his/her tax liability would be nil.
However, if the total tax is more than ₹12,500, the individual can claim only an amount of ₹12,500 as a rebate.
Claim process
Claiming the rebate
Claiming the rebate under Section 87A is a hassle-free process for the taxpayer.
It is automatically calculated and applied to your income tax return if you fulfill the stipulated eligibility conditions.
This implies taxpayers do not have to worry about filling out extra forms or making separate submissions just for this rebate.
This ease of access ensures that eligible individuals can readily benefit from the tax advantages offered.
Tax planning
Impact on tax planning
By knowing how to take advantage of Section 87A, you can make a huge difference in your tax planning.
If you're hovering near the threshold limit, consider investing in eligible instruments under sections such as 80C.
This way, you can lower your taxable income to under ₹500,000. Then, you can claim this rebate, making your financial planning more efficient and effectively reducing your taxes.