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What is rebate under section 87A and who can claim it?

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What is rebate under section 87A and who can claim it?. An individual who is resident in India and whose total income does not exceed Rs. 5,00,000 is entitled to claim rebate under section 87A. Rebate under section 87A is available in the form of deduction from the tax liability. Rebate under section 87A will be lower of 100% of income-tax liability or Rs. 5,000. In other words, if the tax liability exceeds Rs. 5,000, rebate will be available to the extent of Rs. 5,000 only and no rebate will be available if the total income (i.e. taxable income) exceeds Rs. 5,00,000. Now you can scroll down below and check more details for ​What is rebate under section 87A and who can claim it?

What is rebate under section 87A and who can claim it?

Rebate us 87A caknowledge.in

Illustration for better understanding

Mr. Raja (age 35 and resident in India) is a salaried employee. His taxable salary for the year 2016-17 amounted to Rs. 5,84,000. He has deposited Rs. 94,000 in public provident fund untitled for deduction under section 80C. The employer has deducted tax of Rs. 22,660 from his salary. What will be his tax liability for the year?

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Particulars Amount
Income from salary 5,84,000
Income from house property Nil
Profits and gains of business or profession Nil
Capital gains Nil
Income from other sources            Nil
Gross Total Income 5,84,000
Less : Deductions under section 80C on account of investment in PPF     94,000
Total Income (i.e., taxable income) 4,90,000
Tax on taxable income to be computed by applying the applicable rates (*) 24,000
Less : Rebate under section 87A (**) 2,000
Tax Liability After Rebate 22,000
Add: Surcharge ($)      Nil
Tax Liability After Surcharge 22,000
Add: Education cess @ 2% on tax liability after surcharge 440
Add: Secondary and higher education cess @ 1% on tax liability after surcharge       220
Tax liability before rebate under sections 86, section 89, sections​ 90,90A and 91 (if any) 22,660
Less : Rebate under sections 86, section 89, sections​ 90, 90A and 91(if any)         Nil
Tax Liability for the Year Before Pre-paid Taxes 22,660
Less: Prepaid taxes in the form of TDS 22,660
Tax payable/Refundable   Nil

(*) The tax rates for the financial year 2015-16 applicable to an individual below the age of 60 years are as follows :

  • Nil upto income of Rs. 2,50,000
  • 10% for income above Rs. 2,50,000 but upto Rs. 5,00,000
  • 20% for income above Rs. 5,00,000 but upto Rs. 10,00,000
  • 30% for income above Rs. 10,00,000.

Apart from above, education cess @ 2% and secondary and higher education cess @ 1% will be levied on the amount of income-tax. Applying the above normal tax rates, tax on income (before cess) will come to Rs. 24,000.

(**) Rebate under section 87A will be Rs. 5,000, being lower of following :

(a) Tax on total income, i.e., Rs. 24,000; or
(b) Rs. 5,000

($) Surcharge is levied @ 12% on the amount of income-tax where the total income of the taxpayer exceeds Rs. 1 crore. In this case, the total income is below Rs. 1 crore and, hence, no surcharge will be levied.

Must Read – ​What is marginal relief and how it is computed?

Illustration for better understanding

Mr. Kapoor (age 35 years and resident in India) is running a medical store. Taxable business income for the year amounted to Rs. 5,84,000. He does not have any other income. He deposited Rs. 50,000 in public provident fund. Can he claim rebate under section 87A?

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Rebate under section 87A is available to an individual who is resident in India and whose total income does not exceed Rs. 5,00,000. In this case, the gross total income of Mr. Kapoor is Rs. 5,84,000 and he has deposited Rs. 50,000 in PPF and, hence, total income i.e. taxable income will come to Rs. 5,34,000 (Rs. 5,84,000 less Rs. 50,000). Rebate under section 87A is available only if the total income does not exceed Rs. 5,00,000. In this case, the total income exceeds Rs. 5,00,000 and, hence, he cannot claim rebate under section 87A​.

​Can a partnership firm or HUF claim rebate under section 87A?​

Rebate under section 87A is available only to an individual, hence, any person other than an individual cannot claim rebate under section 87A. ​

​Can a non-resident claim rebate under section 87A?

Rebate under section 87A is available only to an individual who is resident in India, hence, non-residents cannot claim rebate under section 87A​

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About Raju Choudhary

Article by Raju Choudhary Raju has written 537 articles. If you like This post, you can follow CAknowledge on Twitter. Subscribe to CAknowledge feed via RSS or EMAIL to receive instant updates.

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