Tax Rebate Under Section 87A (A.Y.2023-24/A.Y.2024-25)

Updates Rebate 87A for AY 2024-25: The alternative tax regime increased the section 87A rebate from Rs. 5 Lakhs to Rs. 7 Lakhs. Under the New Tax Regime (for FY 2023-24/A.Y.2024-25), Rs 7 lakh in income is eligible for a tax rebate under section 87A. (Budget 2023). The rebate amount is Rs. 25,000 or 100% of the tax amount, whichever is lower.

Assessment Year Income Rebate 87A Amount
2021-22 to 2023-24 Rs.5,00,000 100% of income-tax or Rs.12500, whichever is less
2024-25 onwards Rs.7,00,000 100% of income-tax or Rs.25,000, whichever is less

Marginal Relief – Rebate under section 87A is subject to marginal relief from the assessment year 2024-25, if net income exceeds Rs. 7,00,000 but does not exceed Rs. 7,27,770, income tax on such income cannot exceed the amount by which the net income exceeds Rs. 7,00,000.

Tax Rebate Under Section 87A (A.Y.2022-23)

Section 87A Rebate allows taxpayers to have their income tax liability reduced up to Rs.12,500/-. If your annual income, after taking into account the deductions allowed under Chapter VIA, is less than Rs 5 lakh, then you are eligible for the rebate under section 87A. After making a claim for the deduction available under Section 87A, your remaining income tax due will be zero. In the following paragraphs, we will go through each and every aspect of the rebate that is described in Section 87A of the Income Tax Act. The rebate is generally referred to by its most common name, which is the 87A relief.

Who Can Claim Rebate Under Section 87A?

In order to qualify for a rebate under section 87A for A.Y.2022-23, you need to meet the following conditions.

  • A resident individual can claim a rebate from income tax under section 87A. Currently, this rebate is available only if his total income does not exceed Rs.5,00,000.
  • A previous financial year’s total income should not exceed Rs. 5 lakh after deductions under Chapter VI-A (Deductions 80C, 80D and other deductions).

The amount of rebate for the assessment year 2022-23 is limited to Rs.12,500. Hence, if you have a total tax of Rs.12,500 and less than Rs.12500, you do not have to pay taxes at all. 

How to Claim Rebate 87A?

You are eligible to claim a rebate of up to Rs. 12,500 from your total tax liability in accordance with Section 87A of the Income Tax Act.
In order to make a claim for this 87A rebate, the following actions need to be taken:

Step 1: In the first step, calculate the total income you earned during this financial year. For example A.Y.2022-23 (Income earned from 01-04-2021 to 31-03-2022)

Step 2: Now, deduct all the tax deductions you have claimed for tax-saving investments. For Example deductions like 80C, 80D etc.

Step 3: After deductions, you’ve arrived at your Gross Total Income. This represents your taxable income for this financial year.

Step 4: Calculate total tax payable on taxable income but you should not add education cess on it.

Step 5:  Under section 87A, you can now claim a rebate up to Rs.12500/-. You can apply only if you earn less than Rs.5 lakh.

Important Points Under Section 87A

  • Under the old and new tax regimes, Section 87A rebates are available
  • Section 87A relief is available to individual residents only.
  • Those over 60 years old and below 80 years old can also receive rebates under section 87A.
  • Long-term capital gains on equity shares and equity-oriented mutual funds are not eligible for Section 87A rebates (Section 112A)

Rebate 87A (From A.Y. 2014-15 to A.Y.2022-23)

Here is the table to check the rebate under section 87A from A.Y. 2014-15 to A.Y.2022-23.

Different years Total income should not exceed the amount given below Amount of rebate u/s 87A
A.Y. 2014-15 to 2016-17 Rs.5,00,000 100% of income tax or Rs.2,000, whichever is less
A.Y.2017-18 Rs.5,00,000 100% of income tax or Rs.5,000, whichever is less
A.Y.2018-19 and A.Y.2019-20 Rs.3,50,000 100% of income tax or Rs.2,500, whichever is less
A.Y.2020-21, A.Y.2021-22 and A.Y. 2022-23 Rs.5,00,000 100% of income tax or Rs.12,500 whichever is less

Rebate 87A Examples 

To better understand the rebate under section 87A, let’s take some examples for A.Y. 2022-23.

Taxable income or total income (i.e. gross total income – deduction under 80C to 80U)

A.Y.2022-23 is Rs.5,00,000 (Situation 1)

A.Y. 5,10,000 (Situation 2)

Tax liability of X  is calculated in different cases – age of X at any time during the previous year 2019-20 is

40 Years (Case 1), 60 Years (Case 2) or 80 Years (Case 3)

You can also use the income tax calculator for A.Y.2020-21 here.

Particulars Age of X 40 Years Age of X 60 Years Age of X 80 Years
Situation 1 Situation 2 Situation 1 Situation 2 Situation 1 Situation 2
Total Income 5,00,000 5,10,000 5,00,000 5,10,000 5,00,000 5,10,000
Income tax on total income 12,500 14,500 10,000 12,000 Nil 2,000
Less: Rebate u/s 87A 12,500 Nil 10,000 Nil Nil Nil
Balance Nil 14,500 Nil 12,000 Nil 2,000
Add: Health and education cess Nil 580 Nil 480 Nil 80
Tax Liability Nil 15,080 Nil 12,480 Nil 2,080


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