REBATE UNDER SECTION 87 A OF INDIAN INCOME TAX ACT 1961

OBJECTIVE

To provide tax relief to individual tax payers who are in lower income-tax bracket.

CONDITIONS

This rebate will be available if the following two conditions are satisfied:-

• Taxpayer is a resident individual. (He may be ordinarily resident or not ordinarily  resident).
• His total income (gross total income minus deduction under section 80 C to 80U) is Rs 5 lakh or less.

AMOUNT OF REBATE

This rebate will be available from the Assessment year 2014-15 onwards.

The amount of rebate is 100 % of income-tax payable or Rs 2,000 whichever is less.

This rebate will be available from income-tax before adding surcharge or education cess.

AMENDMENT

From Assessment year 2017-18 onwards the amount of rebate is 100 % of income-tax payable or Rs. 5,000 whichever is less.

ILLUSTRATION

Find out the tax liability for the Assessment year 2017-18 in the case of Mr. Mohan (aged 40 years) who is a resident individual in the following situations:

SITUATION	TOTAL INCOME
	Rs.
1.	2,60,000
2.	3,00,000
3.	5,00,000
4.	6,00,000

SOLUTION

	Situation 1	Situation 2	Situation 3	Situation 4
	Rs.	Rs.	Rs.	Rs.
Total Income	2,60,000	3,00,000	5,00,000	6,00,000
Income tax
Upto Rs 2,50,000       – Nil	--	--	--	--
2,50,001 – 5,00,000   – 10%	1,000	5,000	25,000	25,000
5,00,001 – 10,00,000 – 20%	--	--	--	20,000
>10,00,000                 - 30%	--	--	--	--
Income-tax	1,000	5,000	25,000	45,000
Less: Rebate under section 87A	1,000	5,000	5,000	--
Balance	--	--	20,000	45,000
Add: Surcharge	--	--	--	--
Total	--	--	20,000	45,000
Education Cess @ 3%	--	--	600	1,350
Tax Liability	--	--	20,600	46,350