How to Claim Tax Rebate Under Section 87A

The Section 87A rebate was introduced to provide tax relief to taxpayers belonging to the low-income group. As per the old tax regime, resident individuals with a total taxable income of up to ₹5 Lakhs will be eligible for a rebate. However, if you have opted for the new tax regime, you can claim a tax rebate with a taxable income of ₹7 Lakhs.

When the net taxable income is up to ₹7 Lakhs and you choose the new regime, you will be eligible for the following rebate (whichever is lower):

• Income tax amount payable on the total income

• An amount of up to ₹25,000

 

However, if you choose the optional or the old tax regime with a total taxable income that exceeds ₹5 Lakhs, your rebate will be the lower of the following options:

• An amount equal to the income tax amount payable on the total income

• Amount of ₹12,500

You are eligible to claim the rebate benefit under both tax regimes if you meet the following conditions:

• You are an individual taxpayer or a member of a HUF 

• Your net taxable income is below ₹5 Lakhs

• You can claim this 87A rebate if you do not have agricultural income

• You are an Indian resident

1. How to Get a Tax Refund

Section 87A of the Income Tax Act allows a person with an annual income of less than ₹5 Lakhs to claim an income tax refund. This may be done while filing your income tax return, just after you have included the higher and secondary education cess or the education cess.

 

This rebate may be used for tax purposes for general taxable income, as well as for long-term gains, as defined in Section 112 of the Income Tax Act. Section 112 of the Internal Revenue Code applies to gains from the sale of any principal asset as defined under Section 2 (29A) of the Income Tax Act.

 

This rebate applies to short-term interest-based tax on listed equity shares and joint venture fund schemes taxed at 15% under Section 111A.

2. How to Claim a Tax Rebate

Here is how you can apply for a tax rebate under Section 87A:

• Determine your overall gross income for the fiscal year

• Reduce tax deductions and tax-saving investments claimed from your gross total income

• Subtract your income tax deductions from your total income to arrive at your total income for a specific financial year

• Compute your gross tax liability based on your gross total income after excluding cess

• Claim a rebate if your total income does not exceed ₹7 Lakhs and ₹5 Lakhs under new and old tax regimes, respectively

The Section 87A tax refund is an excellent way to save money on income tax in India in a fiscal year. To read more about income tax and how to save on taxes, explore tax-related articles on Bajaj Markets.