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Section 87A – Income Tax | Company Vakil

Rebate u/s 87A – Income Tax

For the reduction in tax liability of an individual with income not exceeding Rs.3, 50,000, the Rebate u/s section 87A of the Income Tax Act, 1961 came into the introduction in the Finance Act, 2013. The refund/repayment is furnished as the withdrawal of total liability in tax encountered.

This article provides detailed information about the rebate u/s 87A of the Income Tax Act.

Section 87A – Income Tax Rebate

For the relief of the taxpayers falling under the 10% tax slab, this section was introduced in 2013. The enactment of this section provides relaxation in the tax liability by offering reimbursement up to 100% of the income tax or Rs.2,500 by comparing the lesser amount, if the individual with the total net income of Rs.3,50,000 has claimed for the rebate. The rebate should be added to the total tax prior to the addition of the Educational Cess of 3%. The total taxable income concerning the rebate is the difference of the Gross Total Income and Deduction u/s 80C to 80U.

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Eligibility to claim Rebate

  • Resident Individual can only avail this rebate.
  • Total income not exceeding Rs.3,50,000 annually.
  • Hindu Undivided Family, AOP/BOI, NRI, company or a firm cannot avail the provision of the rebate.
  • An individual with a tax liability less than Rs.2,500 is not eligible for the refund.
  • Senior citizens (aged between 60 to 80 years) can avail the rebate. However, the rebate is not available for the senior citizens crossing 80 years of age as they are already spared from any income tax provision.

Procedure for calculating Rebate u/s 87A

Step 1: Find the Net Gross Total Income. Decrease it under the Section 80U and Section 80C (each separately).

Step 2: Determine the basic limit of exemption from the resulting taxable income

Step 3: Compute the tax liability derived from Income tax slabs.

Step 4: Reduce the amount of rebate which is permissible.

Step 5: Compute the total of EC and SHEC at 3% for the balance payable amount.

Section 80C to Section 80U:

  • Section 80C

For claiming deductions which amount to a total of Rs 1.5 lakhs, the deduction under Section 80C is enacted. HUF’s and individuals are eligible for this section. This scheme includes several investments – Employee Provident Fund (EPF), Sukanya Samridhi Scheme, Unit Linked Insurance Plans (ULIP), National Savings Certificate (NSC), Voluntary Provident Fund (VPF), 5 Year Tax Saving Schemes, 5 Year Post Office Time Deposit, Senior Citizens Saving Schemes , Public Provident Fund (PPF) and Equity-Linked Insurance Schemes (ELSS).

  • Section 80D

Deductions under Section 80D are enacted concerning the expenses on medical insurance, health checkup and other medical expenditure. The individual can claim up to Rs 1,50,000 under these deductions. The taxpayer, spouse, parent or children whether dependent or independent can avail this deduction.

  • Section 80E

For the interest provoked while acquiring loans for higher education, the deduction under Section 80E is applied. This will be applicable for a term of eight years by the individuals acquiring loans from acknowledged financial institutions and charitable trust. While procuring the loan, the individual should have submitted interest amount on such loan.

  • Section 80G

For the acknowledgement of charitable institutions, the deduction under Section 80G is undertaken. Specific donations are reduced to 50% or 100% as per the case. Stamped receipt and photography of 80G certificate are required for claiming deduction under this section.

  • Section 80IA

For deductions on received income by engaging in industrial activities (telecommunication, industrial parks, power generation, SEZs), the deduction under Section 80IA is implemented.

  • Section 80J

For the deduction of the profits and gains receipts from the new industrial undertakings, ships or hotel businesses, the deduction under Section 80J is implied.

  • Section 80LA

Scheduled banks having units of banks offshore in SEZs, International Financial Service Center bodies and banks outside the precincts of India can avail deduction under this section.

  • Section 80P

The co-operative societies can avail the deduction under Section 80P for the received income from the sale of agricultural harvest, fishing, baking, cottage industries, etc. Other businesses (based on the type of activities) can also avail deduction under this section and claim between a sum of Rs 50,000 and Rs 1,00,000.

  • Section 80QQQB

Deductions relating to the receipt of profit and gains from books publication and printing are covered under this section. 20% of the total taxable amount can be claimed by the concerned taxpayer.

  • Section 80R

The individual receiving remuneration from a university or educational institution set outside India for serving as a professor, teacher, institution, research worker, body or association can avail deduction under Section 80R.

  • Section 80TTA

Deductions relating to the interest on deposits in the savings account are covered under this section. This section states that the interest on deposits in a saving account with a specific banking company, post-office or co-operative society is included in the gross total income of an individual or HUF. Stipulated deductions will be provided to the concerned taxpayers.

  • Section 80TTB

Provisions stating the interest on deposits remitted by the senior citizens are entailed under the deductions of Section 80TTB (interest of individuals and HUF) which is very much similar to the ones stated in Section 80TTA (interest on deposits remitted by senior citizens).

  • Section 80U

Deductions availed by the physically challenged residents are dealt under this section. Prior to the claiming for the benefits, the individual must be approved as disabled for claiming the disability.

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