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Tax Rebate u/s 87A of Income Tax Act

Last Update Date : June 26, 2019
Estimated Read Time: 4 min

Rebate under section 87A of Income Tax Act

The job of the government is to provide security and to take care of its citizens.  When it comes to paying taxes, the government tries to help by introducing provisions in the income tax act to reduce an individual’s tax bracket.  To reduce an individual’s tax liability, rebate u/s 87A of the Income Tax Act was introduced, which is outlined in this guide.

Interim Budget 2019 Update

The Government has proposed to amend section 87A by raising the amount of rebate from Rs 2,500 to Rs 12,500. Taxpayers with income up to Rs 5,00,000 will get the benefit of this rebate if the proposed amendment gets approved.

[Read more: Proposed Changes in the Income Tax Laws in Budget 2019]

What is Rebate u/s 87A?

Rebate under section 87A of Income Tax Act is obtainable in the form of a deduction from the tax liability. It was first introduced in the Finance Bill of the year 2013 with a view to provide benefits to the people who are earning up to Rs 5,00,000. The purpose of this rebate is to lessen the tax burden of individuals in the lower income bracket. Earlier the rebate under Section 87A was Rs 5,000, provided the individual was an Indian resident, and his/her total annual income did not exceed Rs 5,00,000. However, with the introduction of the Finance Bill 2017 , the amount was changed.

As per the the Finance Bill 2017, an Indian resident earning up to Rs 3,50,000 per annum, is entitled to claim rebate under section 87A. Rebate under section 87A is allowed up to a maximum of Rs 2,500. It means the amount of rebate will be lower of either Rs 2,500 or 100% of the income-tax liability.

Note: This amendment will be effective from 1st April 2018. Accordingly, the amendment would be applicable with respect to the assessment year 2018-19 and subsequent assessment years.

Only individuals can avail of rebate under Section 87A.  It is not available for firms, companies or even Hindu Undivided Family.

Online Tax Filing with H&R Block India

Who can claim for rebate under section 87A for FY 2017-18?

To claim a rebate for Financial Year 2017-18 the individual needs to satisfy below-mentioned criteria:

  1. An individual is a resident of India
  2. Total income should not exceed Rs 3,50,000

On satisfying both conditions mentioned above, an individual would be eligible to get a rebate under section 87A of up to Rs 2,500.

Note: This rebate (for FY 2017-18) is applied on total tax before adding 3% Education Cess.

Senior Citizens (above the age of 60 years and less than 80 years) are also eligible for a rebate under section 87A.

The below example will shed more light on the understanding of permissible rebate under section 87A:

Total Income (Rs.)Income TaxRebate u/s 87ANet Tax
Rs 3,00,0002,5002,500Nil
Rs 3,50,0005,0002,5002,500
Rs 4,00,0007,500Nil7,500
Rs 5,00,00012,500Nil12,500

[ Read: Income Tax Slab Rates in India ]

Eligibility criteria for claiming rebate u/s 87A for FY 2018-19

No further changes have been proposed in the Finance Bill towards the rebate for FY 2018-19. In order to claim the rebate under Section 87A for the financial year 2018-19, an individual’s total income doesn’t exceed Rs 3,50,000.

Below example will shed more light on the understanding of permissible rebate under section 87A available to various income groups:

Total/Taxable Income (Rs.)Income TaxRebate applicable u/s 87ANet Tax
Rs 3,00,0002,5002,500Nil
Rs 3,10,0003,0002,500500
Rs 3,20,0003,5002,5001,000
Rs 3,30,0004,0002,5001,500
Rs 3,40,0004,5002,5002,000
Rs 3,50,0005,0002,5002,500

People also ask

Q. Is Section 87A applicable to Non-Resident Indians (NRI’s)?

A. No, this rebate is applicable only to Indian residents

Q. What is Total Income?

A. The total income means total of Income under heads (Salary, Income from House Property, Income from Business & Profession, Income from Capital Gains and Income from Other Sources) – Deductions u/s 80C to 80U.

Q. What are the conditions to satisfy to claim rebate under section 87A?

A. The individual is resident of India. And the total income after deducting Deductions u/s 80C -80U is equal to or less than Rs. 3,50,000.

Q. Is Rebate applicable to Senior Citizens?

A. Yes, the Rebate is applicable to Senior Citizens who are 60 years old but less than 80 years of age.

How can H&R Block help you?

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Chetan Chandak (B.Com, LLB)
Chetan is the Head of Tax Research at H&R Block (India) with an experience of more than a decade in tax advising. He is also a regular contributor for some of the leading news publications in India such as Economic Times, Financial Express and Money Control. Professionally, Chetan is fascinated by international taxation and expat-related tax research.

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