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Learn who can avail tax rebate u/s 87a of Income Tax Act. In this guide by H&R Block we discuss about the eligibility criteria for claiming rebate under section 87a for AY 2018-19 and AY 2019-20. Click here to read the guide now!

Tax Rebate u/s 87A of Income Tax Act

Last Update Date : June 25, 2018

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, section 87A of the income tax act was introduced, which is outlined in this guide.

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 more than 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.

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

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

  1. An individual is 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 Tax Rebate u/s 87A Net Tax
Rs. 300000/- 2500/- 2500/- Nil
Rs. 350000/- 5000/- 2500/- 2500/-
Rs. 400000/- 7500/- Nil 7500/-
Rs. 500000/- 12500/- Nil 12500/-

[ 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 Tax Rebate applicable u/s 87A Net Tax
Rs. 300000/- 2500/- 2500/- Nil
Rs. 310000/- 3000/- 2500/- 500/-
Rs. 320000/- 3500/- 2500/- 1000/-
Rs. 330000/- 4000/- 2500/- 1500/-
Rs. 340000/- 4500/- 2500/- 2000/-
Rs. 350000/- 5000/- 2500/- 2500/-
Rs. 400000/- 7500/- Nil 7500/-
Rs. 500000/- 12500/- Nil 12500/-

Frequently Asked Questions

1. Is Section 87A applicable to Non-Resident Indians (NRI’s)?
No, this rebate is applicable only to Indian residents

2. What is Total Income?
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.

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

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

To claim rebate under section 87A or to maximize your tax savings options, consult the experts at H&R Block India. 

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