Introduction
Do you know what rebate is all about? If not, then here is a guide on rebate you must go through in order to learn about the concept of rebate u/s 87A for AY 2023-24.
Well, in short, it is something that signifies a reduction in tax liability. As per the Income Tax Act 1961, there are various tax reliefs given to individuals in order to reduce tax liability. One such tax relief is “Rebate u/s 87A”.
So, if you have an income below or up to Rs. 5,00,000, then you should definitely read on “what is rebate u/s 87A for AY 2023-24” so as to claim a reduction of Rs. 12,500.
What is rebate in Income Tax?
Section 87A describes the concept of rebate under the Income Tax Act. The rebate is granted to individuals who are Resident of India (ROI). The term “rebate” is granted if one main condition is met. The necessary condition states that the taxable income shall not exceed the threshold limit of Rs. 5,00,000. Accordingly, where a person being a resident of India has an income exceeding Rs. 5,00,000 then, to him the rebate will not be granted.
Rebate u/s 87A for AY 2023-24
A tax rebate of Rs. 12,500 or an amount equal to the tax (whichever is lower) shall be allowed to individual falling under the limit given under Section 87A for AY 2023-24.
Given that, if an individual’s total taxable income is up to Rs. 5,00,000 then the allowed rebate amount shall be:-
- 12,500; or
- Amount of tax payable; or
whichever is lower, allowed as rebate amount u/s 87A for AY 2023-24. The tax rebate for AY 2023-24 has been kept the same for both the old and new income tax regime. In addition to it, the provision is applicable only to resident and no such provision of rebate u/s 87 for senior citizens is applicable. Hence, no senior citizen is allowed to claim the rebate given under Section 87A.
How to get rebate in Income Tax?
Primarily, the tax rebate under Income tax can be claimed only when two of the essential conditions are met, namely:-
- A person must be a Resident of India (ROI)
- A taxpayer must fall under the threshold limit of Rs. 5,00,000.
When both conditions are met, claiming rebate under section 87A shall be possible. Simultaneously, filing of Income Tax Return (ITR) is also necessary as the rebate will automatically be claimed at the time of ITR filing. Therefore, we can conclude by saying that the 87A rebate in the new tax regime shall remain the same as that applicable under old regime being, Rs. 125,000.
How is Section 87A rebate calculated?
Rebate under Section 87A shall be calculated by following the below-mentioned steps:-
Step 1 : Calculate Gross Total Income
Step 2 : Subtract the deductions given under Section 80C to 80U
Step 3 : Compute the tax amount payable as per income tax slabs
Step 4 : And lastly, calculate the Health and Education Cess (HEC) @4% on the balance tax payable
These are the 4-step guide on section 87A rebate calculation. One must keep in mind that the rebate is deducted from income tax before the calculation of the Health and Education Cess (HEC).
Income Tax Section 87A is the applicable section granting a rebate to an individual. However, section 80C, 80D, 80EE also provide rebate that helps in reducing the taxable income of a resident being an individual.
Conclusion
This was all about rebate including what is rebate, how much rebate is given, it’s calculation, how to get rebate etc. All of this will become easier if you consult a professional. Doing so, will help you get the maximum of income tax deductions and also assist you by informing you everything in detail.
We at EAdvisors are there to help you file your ITR on time, To guide you all the deductions you can claim and provide you with all advices to save maximum of taxes. So, stay tuned and consult us whenever you need any advice or want to enjoy our services.
