Rebate u/s 87A - Income Tax - Applicability & Eligibility

Rebate u/s Section 87A of the Income Tax Act was introduced in the year 2013 with the objective of reducing the tax liability of the assessees whose income is less than Rs 3,50,000. The rebate is provided as a deduction from the total tax liability incurred by the assessee. In this article, we briefly discuss the rebate u/s 87A of the Income Tax Act.

Applicability

The rebate can be availed by resident individuals whose income, after the process of deduction under Section 80, is within the specified limit of Rs 3,50,000. The provision of the rebate is not extended to Hindu Undivided Family, NRI, AOP/BOI, firm or a company. Individuals whose tax liability amounts to less than Rs 2,000 shall not be considered eligible for the rebate.

Facets of Rebate u/s 87A

The provision of the rebate is inclusive of the following features:

The provision of the rebate is only applicable for Indian residents, and not NRI’s, HUF, AOP/BOI, firm, and other categories of assessees.
Senior citizens i.e. people aged between 60 years and 80 years are considered eligible for the rebate.
The rebate is not applicable to super-senior citizens, whose age is above 80 years as they are already exempted from any of the provisions of income-tax.
The rebate shall be applied to total tax before adding the Educational Cess of 3%.
The total rebate provided to the individual would be Rs 2,500 or the total amount of tax liability (whichever is less).

Amount of Deduction u/s 87A

The amount of deduction under this section shall either be 100% of the income-tax liability or Rs 2,500 (Whichever is lower).

Computation of Income Tax Liability

As already observed, the amount of rebate could either amount to the entire tax liability of Rs 2,500; whichever is lower. The total taxable income pertaining to the rebate would be the difference between the ‘Gross Total Income’ and ‘Deductions u/s 80C to 80U’.

Process of Making Calculation u/s 87A

Calculation of rebate under Section 87A shall be performed in the following manner: Step 1:- Calculate the Net Gross Total Income, and reduce it under Section 80C and 80U (Separately Covered). Step 2:- Deduct the basic exemption limit from the Total Taxable Income derived. Step 3:-Calculate the liability of tax based on Income Tax slabs. Step 4:- Deduct the amount of permissible rebate. Step 5:- For the balance payable amount (if any) calculate the sum of EC and SHEC at the rate of 3%.

Deductions under Chapter VI-A: Section 80C to 80U

Deductions under this chapter are used to calculate the total income of a taxpayer after determining the gross income of a taxpayer. The various deductions available under this chapter are mentioned below in the form of brief outlines:

Section 80C

Deduction under Section 80C is performed to claim deductions amounting to a maximum of Rs 1.5 lakhs. Individuals and HUF’s are considered eligible for this deduction. The following investments are included in this section:

Employee Provident Fund (EPF)
Voluntary Provident Fund (VPF)
Public Provident Fund (PPF)
National Savings Certificate (NSC)
5 Year Post Office Time Deposit
5 Year Tax Saving Bank Fix Deposit
Equity Linked Saving Schemes (ELSS)
Unit Linked Insurance Plans (ULIP)
Senior Citizens Saving Schemes
Sukanya Samridhhi Scheme

Section 80D

Section 80D of the Income Tax Act consists of deductions pertaining to expenditures on medical insurance, preventive health checkup and other medical expenses. A sum of Rs 1,50,000 can be claimed under these deductions. The deduction can be availed by the taxpayer, spouse, children or parent; who might be dependent or independent.

Section 80E

Deduction under Section 80E is applicable for the interest incurred while procuring loans for higher education. These deductions will be effective for a period of 8 years, and can only be availed by individuals who have procured loans from a recognized financial institution or charitable trust. Moreover, it is significant that he/she has already remitted some amount as interest on such loan while procuring it.

Section 80G

Section 80G of the Income Tax Act deals with deductions performed for the contributions made to recognized charitable institutions. According to this section, specified donations are deductible to an extent of 50% or 100%, as may be the scenario. Deductions under Section 80G can be claimed by furnishing the following documents:

Stamped receipt
Photography of 80G certificate

Section 80IA

Deduction under Section 80IA is implemented for availing deductions on income received by pursuing industrial activities connected with telecommunication, power generation, industrial parks, SEZs, and the likes of it.

Section 80J

Section 80J deals with deductions pertaining to the receipt of profits and gains from new industrial undertakings, ships, or hotel businesses.

Section 80LA

Deduction under Section 80LA is meant to be availed by scheduled banks having offshore banking units in SEZs, entities of International Financial Service Centers and banks which are located outside the confines of India.

Section 80P

A complete deduction under Section 80P is granted to co-operative societies for the incomes received from cottage industries, fishing, banking, sale of agricultural harvest, etc. Other businesses can claim deductions ranging between a sum of Rs 50,000 and Rs 1,00,000; based on the kind of activities pursued by them.

Section 80QQQB

Section 80QQB covers deductions pertaining to the receipt of profit and gains from printing and publication of books. The concerned taxpayer, in this case, is entitled to claim a deduction of 20% from the total taxable amount.

Section 80R

This Income Tax Act deals with deductions pertaining to the remuneration received by an individual from a university or educational institution located outside India for the services provided in the capacity of a professor, teacher, research worker, institution, association or body.

Section 80TTA

Section 80TTA is a section of income tax which talks about deductions pertaining to the interest on deposits in savings account. It states that if the gross total income of an individual or HUF is inclusive of interest on deposits in a saving account with a specified banking company, co-operative society or post-office, the concerned taxpayer will be provided with the stipulated deductions.

Section 80TTB

Section 80TTB of the Income Tax Act consists of provisions pertaining to the interest on deposits remitted by senior citizens. Provisions of Section 80TTB is almost akin to the ones specified in Section 80TTA. The only difference being that Section 80TTA deals with interest in respect of individuals and HUF, whereas this particular section deals with interest on deposits remitted by senior citizens.

Section 80U

Section 80U of the Income Tax Act specifically deals with deductions provided to the physically challenged residents. The person claiming the disability must be certified as disabled before claiming for benefits under this Section.