The government gives income tax rebate to the people who have low income. This rebate is given under section 87A of the income tax act. It becomes applicable only if there is a tax liability upon you. Also, your taxable income should not cross the specified limit. Through this rebate, the government has given concession to low earner without the change in the income tax slab. This rebate continues for FY 2018-19.
Eligibility for Income Tax Rebate
The income tax rebate is not available to everyone. You would get this benefit if fulfil following 2 conditions.
- You are a resident individual Indian citizen.
- Your total taxable income (After deductions) is not more than 3.5 lakhs.
The Amount of Rebate
Under section 87A, you get the rebate of 2,500. This amount is deducted from your payable income tax. If your payable tax is less than 2,500, the rebate amount would be your tax only.
The rebate is applied to your total tax before adding the cess. The rebate is also available to senior citizens who are above the age of 60. There is no need of rebate for super senior citizens as the get exemption up to the earning of ₹5 lakhs.
To understand the rebate calculation, you should see income and tax calculation of following 4 people.
|Taxpayers||Total Income||Applicable Tax||Rebate u/s 87A||Tax Payable|
Case 1 – Ajay
The total income of Ajay is 2.7 lakhs. As you know that income above 2.5 lakhs become taxable. Hence, in this case, the income is 20 thousand more than 2.5 lakhs. The tax rate for this 20,000 would be 5%. Thus, the applicable tax would be ₹1000. However, Since Ajay earns less than 3.5 lakhs, the rebate would be available for him. As maximum rebate is 2.5 thousand but his total tax is only 1000, thus his total tax would become zero.
Case 2 – Rajeev
Rajeev earns 3 lakh taxable income in a year. He would be liable to the tax of 2,500. As his earning is less than 3.5 lakhs, the rebate is applicable in his case. So, the rebate of 2,500 is deducted from his tax of 2,500. The resultant tax would be zero.
Case 3 – Prabhat
Prabhat earns 3.5 lakh taxable income. The tax on his income would be ₹5000. The rebate is also applicable in Prabhat’s case. Hence after the deduction of rebate the payable tax would be only 2,500. After the cess of 4%, the final payable tax would be ₹2600
Case 4- Anil
The Taxable income of Anil is 4 lakh. The tax on this income would be ₹7,500. As this income is more than 3.5 lakh, there would not be any rebate. Hence, Anil has to pay the tax of ₹7,500 along with cess of ₹300. His final payment amount would be ₹7,800.