FAQs on rebate u/s 87A

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FAQs on rebate u/s 87A

Rebate u/s 87A refers to the relief from paying tax for certain individuals. Till FY 2018-19, the resident individuals with a total taxable income of less than equal to Rs 3.5 lacs were able to claim the rebate of tax the extent of Rs. 2,500.

In the budget 2019, the Finance Minister increased the limit of rebate u/s 87A from Rs 2,500/-  to  Rs 12,500/-. Accordingly, the individuals with total income less than or equal to Rs. 5 lakhs shall be entitled to a deduction of an amount equal to 100% of such income-tax or an amount of Rs. 12,500, whichever is less, from the amount of income-tax on his total income which he is chargeable to tax.

Click here to understand the detailed provision and computation.

Some Frequently Asked Questions on Rebate

Q. Can NRI get the benefit of rebate u/s 87A?

Ans: As mentioned in section 87A of the Income Tax Act, only the Resident individuals are eligible to claim Rebate u/s 87A. Hence a non-resident cannot take the benefit of Rebate u/s 87A.

 

Q. Can HUF claim Rebate u/s 87A?

Ans: No. Only the Resident individuals are eligible to claim Rebate u/s 87A.

 

Q: I am a resident Individual and my taxable income after deductions u/s 80 is Rs 4.5 lakh for FY 19-20. The tax payable on this is Rs. 10,000. After taking the benefit of rebate u/s 87A my tax liability will be Nil.  Can I avoid filing a tax return since I am not liable to pay tax?

Ans: No. The rebate u/s 87A is claimed by filing the tax return. The fact that your total income exceeds the minimum threshold of Rs 2,50,000/-, you are liable to file a tax return. In the tax return, you can claim the rebate of entire tax payable of Rs. 10,000 for FY 19-20 and pay Nil tax or claim a refund for the tax already paid or deducted at source if any.

 

Q. I am a resident individual and my taxable income for FY 2019-20 after taking benefit of all deductions is Rs. 5,08,000/- Can I get the benefit of rebate u/s 87A?

Ans: No. The rebate u/s 87A can be claimed only if your total income minus deductions is less than or equal to Rs. 5 lakh for FY 19-20. In the above scenario, considering your income does not include capital gains, and you are below 60 years of age, you will have to pay taxes of

 

Q: I am a resident individual and my total income for FY 2019-20 comprises of LTCG (other than equity shares) of Rs 5 lakh. How will my tax liability look like? Can I claim rebate u/s 87A?

Ans: Yes. Since your total income chargeable to tax is exact Rs 5 lakh you satisfy the condition of total income less deduction equal to or less than Rs 5 lakh. However, your rebate will be restricted to Rs. 12,500. Your Tax liability will be as follows assuming you are less than 60 years old:

Gross Total Income

5,00,000

Less: Deductions u/s 80

NIL

Taxable income    

5,00,000

Tax liability (@ 20% on LTCG)

50,000

Less: Rebate u/s 87A (Max)

(12,500)

Tax payable     

37,500

Add: Cess @ 4%

1,500

Total tax liability    

39,000

Q: I am a resident Individual and my income consists of the only LTCG from equity shares of Rs 5lacs. Can I get the benefit of rebate u/s 87A?

Ans: No. The LTCG from equity shares are chargeable to tax u/s 112A from FY 2018-19. However, as mentioned in Sec112A,

Where the total income of an assessee includes any long-term capital gains on equity shares as mentioned in subsection 1 of sec 112A, the rebate under section 87A shall be allowed from the income-tax on the total income as reduced by tax payable on such capital gains.

Hence, you cannot claim any rebate u/s 87A in such a scenario.

Q: I am a resident Individual and my age is 84. Can I get the benefit of rebate u/s 87A?

Ans: The rebate u/s 87A can be claimed by any resident individual if his / her total taxable income minus deduction is equal to or less than Rs. 5 lakhs. The fact that you are super senior citizens, your taxable income up to Rs 5 lakhs attracts Nil tax (Refer tax slabs).

Rebate u/s 87A is irrelevant to super senior citizens.

Q. I am a 35 years old resident and salaried individual. My salary is Rs 10 lakhs p.a. I own two houses, one in Mumbai where I live and another in Jaipur. Can I reduce my tax liability to Nil for FY 19-20?

Ans: The rebate u/s 87A can be claimed by any resident individual if his / her total taxable income minus deduction is equal to or less than Rs. 5 lakhs. Hence, If you plan appropriately and reduce your taxable income after deductions to Rs 5 lakhs, you can avoid the taxes. Below are a few investment options:

  1. We assume that you have taken a Home loan to purchase the properties. Ensure that the interest payments on those are Rs 2 lakhs p.a.
  2. Invest in certain payable deductions u/s 80 C up to Rs 1,50,000 (Click here to know the details of such payments)
  3. Invest to get the deduction u/s 80D up to Rs 50,000.
  4. Invest to get the deduction u/s 80 CCD up to Rs 50,000.
  5. You can claim rebate u/s 87A and get tax liability to zero.

This is how your tax liability for FY 19-20 will look like:

Income under the head Salaries
Gross Salary

10,00,000

Less: Standard Deduction

(50,000)

Net Salary (A)     

9,50,000

Income under the head House Property
Notional rent

NIL

Less: Interest on Home loan

(2,00,000)

Loss from the head house property (B)     

(2,00,000)

Gross Total Income (A)+(B)   

7,50,000

Less: Deductions

U/s 80C

(1,50,000)

U/s. 80D

(50,000)

U/s. 80CCD

(50,000)

Net taxable income     

5,00,000

Tax liability     

12,500

Less: Rebate u/s 87A (Max)

(12,500)

Net tax payable     

NIL

The author of the article is CA Janhavi Phadnis. If you have any queries concerning the above article. Please write to us either in the comments section below or email us on info.financepost@gmail.com.

Disclaimer: The views expressed in the above article is exclusive to the author. Anyone relying on it is expected to take adequate professional care before using/implementing the content of the article. The website/author will in no case be liable for any damages incurred by relying on the content without adequate consultation.

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