The basic meaning of rebate u/s 87A is that if your income is below a certain limit as mentioned in the section then you will get a tax relief of certain amount as mentioned in the provisions of the section.
Now let’s understand the conditions which you need to fulfill to claim such rebate:
For FY 2018-19:
- This rebate can be claimed only be resident individuals. It cannot be claimed by HUF or NRI.
- Total income doesn’t exceed Rs. 3,50,000/-. This total income is basically the taxable income of the assessee i.e. it is derived after considering all the deduction u/s 80C to 80U and after claiming all the losses from all the head of income.
- The total amount of rebate allowed is 2,500/- or 100% of tax whichever is lower.
- This can be claimed even if assessee is filing late return.
- Now let’s take an example: Suppose a person earns Rs. 3,00,000 long term capital gain income on sale of property and he is not having any other income. In this case he will first use basic exemption limit i.e. 2,50,000/-. Now his taxable income is 50,000, tax on such income is Rs. 10,000/- (i.e. 20% of taxable income). Now he is also eligible for rebate of Rs. 2,500/-, therefore net tax payable comes down to Rs. 7,500/-.
For FY 2019-20:
- This rebate can be claimed only be resident individuals. It cannot be claimed by HUF or NRI.
- Total income doesn’t exceed Rs. 5,00,000/-. This total income is basically the taxable income of the assessee i.e. it is derived after considering all the deduction u/s 80C to 80U and after claiming all the losses from all the head of income.
- The total amount of rebate allowed is 12,500/- or 100% of tax whichever is lower.
- This can be claimed even if assessee is filing late return.
- Now let’s take an example: Suppose a person earns Rs. 5,00,000/- long term capital gain income on sale of property and he is not having any other income. In this case he will first use basic exemption limit i.e. 2,50,000/-. Now his taxable income is 2,50,000/-, tax on such income is Rs. 50,000/- (i.e. 20% of taxable income). Now he is also eligible for rebate of Rs. 12,500/-, therefore net tax payable comes down to Rs. 37,500/-.
Therefore Rebate can even be claimed on income charged to tax at special rate as section 87A doesn’t speak or restrict it’s benefit to income charged to tax at slab rate.
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