Section 87A Tax Rebate FY 2019-20 | How to check if you are eligible for the Tax Rebate?

Interim-Budget 2019-20 & the Finance Bill 2019 have been tabled in Parliament. The Income Tax Slab rates have been kept unchanged by the Finance Minister for the Financial Year 2019-20 (Assessment Year 2020-2021).

One of the Budget Tax proposals that has drawn everybody’s attention is – ‘Zero tax liability or No income tax for Rs 5 Lakhs taxable income.’

As per the Finance Bill 2019, the threshold limit of tax rebate u/s 87A has been revised to Rs 12,500 for FY 2019-20. This tax rebate is applicable if an individual’s (Resident Individuals including Senior Citizens) taxable income is less than or equal to Rs 5 Lakhs (only).

The Finance Bill 2019-20 Interim Budget 2019 Section 87A Revised Tax Rebate details pic
The Finance Bill 2019 – Revised Section 87A Income Tax Rebate AY 2020-21

So, what is the meaning of Tax Rebate?

What is Tax Rebate?

Tax rebate is a refund on taxes when the liability on tax is less than the tax paid or liable to pay, by the individual is referred to as Income Tax Rebate.

Income Tax Rebate Vs Tax Exemption Vs Tax Deduction

  • Income Tax Exemptions are allowed to be claimed from a specific source of income (ex : Salary) and not from the Gross Total Income. Ex : HRA
  • Income Tax Deductions are allowed to be claimed under each Head and also from Gross Total Income. The taxpayer can claim deductions in case he/she incurs specified expenditure or make specified investments under various sections of the IT Act. Examples: Investments u/s 80c (or) Health Insurance premium u/s 80D.
  • Whereas, Income Tax Rebate is allowed to be claimed from the total tax payable. So, the exemptions and deductions are allowed to be claimed from the Income and Rebate is allowed from the tax payable.

Revised Tax Rebate Limit u/s 87A

The Tax rebate of Rs 2,500 for individuals with income of up to Rs 3.5 Lakh had been proposed in Budget 2017-18 and the same has been continued for FY 2018-19 / AY 2019-20 as well.

The rebate us/ 87A has now been revised to Rs 12,500 for FY 2019-20 / AY 2020-21. This means that if the total tax payable is lower than Rs 12,500, then that amount will be the rebate under section 87A. This rebate is applied to the total tax before adding the Education Cess (4%).

  • Only Individual Assesses earning net taxable income up to Rs 5 lakhs are eligible to enjoy tax rebate u/s 87A.
  • For Example : Suppose your yearly pay comes to Rs 6,50,000 and you claim Rs 1,50,000 u/s 80C. The total net income in your case comes to Rs 5,00,000 which makes you eligible to claim tax rebate of Rs 12,500.
  • The amount of tax rebate u/s 87A is restricted to maximum of Rs 12,500. In case the computed tax payable is less than Rs 12,500, say Rs 10,000 the tax rebate shall be limited to that lower amount i.e. Rs 10,000 only.
  • The Tax Assesse is first required to add all incomes i.e. salary, house income, capital gains, business or profession income and income from other sources and then deduct the eligible tax deduction amounts u/s 80C to 80U and under section 24(b) (Home Loan Interest) to come up with the net taxable income.
  • If the above net taxable income happens to be less than Rs 5 lakhs then the tax rebate of Rs 12,500 comes in to the picture and should be deducted from the calculated total income tax payable.

How to check if you are eligible to claim Section 87A Tax Rebate FY 2019-20 / AY 2020-21?

Below image gives you an idea on how to arrive at the eligibility to claim the revised tax rebate under section 87A for FY 2019-20;

Calculation of income tax rebate on tax payable for FY 2019-20 AY 2020-21 Section 87A Tax Rebate FY 2019-20
How to check the eligibility of Income Tax Rebate u/s 87A for AY 2020-21?

Eligibility to Claim Rebate Under Section 87A FY 2019-20 (AY 2020-21) – Illustrations

Income Tax Calculation for FY 2019-20 AY 2020-21 with revised Section 87A limit illustrations pic
Income Tax Calculation for FY 2019-20 AY 2020-21 with revised Section 87A limit | illustrations
(Assumption : Pensioner is a Senior Citizen)

FAQs on Section 87A Income Tax Rebate

  • Can NRIs claim rebate under section 87A? – No, this tax rebate is only allowed for Resident Indians. Therefore, taxpayers qualifying as Non-Resident Indians are not eligible for a rebate under 87A.
  • Can this rebate be claimed by a Firm or Company? – This rebate is only allowed to individuals. HUFs or firms or companies cannot claim this tax rebate.
  • Are Cess & other charges (if any) need to be added before or after claiming this Tax Rebate? – Education Cess and SHEC are levied on the Tax payable after allowing for tax rebate of up to Rs 12,500.
  • My Taxable income is less than Rs 5 Lakh, so my tax liability would be NIL. Do I still need to file my Income Tax Return for FY 2019-20 / AY 2020-21? – You can avail of the zero tax benefit announced in Budget 2019 but you still need to file your income tax return (ITR). The income tax exemption limit for all citizens below 60 years still remains at Rs 2.5 lakh and for senior citizens Rs 3 lakh. Therefore, if you are earning anything above these basic exemption limits annually then you are mandatorily required to file your ITR. 

Continue reading:

  1. Rebate under Section 87A AY 2021-22 | Is Sec 87A Tax Rebate Available under New Tax Regime?
  2. All in one guide to ‘Budget 2019 Proposals related to Personal Finance’
  3. Budget 2019 – Rs 1.5 lakh Additional Income Tax deduction on affordable home loans | Section 80EE
  4. Latest Income Tax Slab Rates FY 2019-20 / AY 2020-21
  5. List of Important Tax Deductions for FY 2019-20.
  6. Best Tax Saving ELSS Mutual Fund Schemes
  7. Snapshot of 22 most Popular Investment options in India!
  8. How Income Tax Dept tracks the High Value Financial Transactions?

(Image courtesy of Stuart Miles at FreeDigitalPhotos.net) (Post first published on : 07-February-2019)

Kindly note that the above information is based on the proposals presented in the Interim Budget 2019-20. The above details will be updated (if required) after the presentation of the Full Budget (if any) by the next Govt.

About The Author

  • Vipan Verma says:

    Sir,
    DCPS AMOUNT RECEIVING FROM LIC RS.3990/- P.M..AS I CHOSE LIC IN MY CASE & LIFE Certificate to LIC HAS TO SUBMIT AFTER FIVE YEARS.
    IS THIS COMES UNDER HEAD PENSION. CONTRIBUTION BY EMPLOYEE & EMPLOYER 2℅ & 10℅ OF SALARY. IS RELATED TO MY PREVIOUS QUARRY.

  • Vipan Verma says:

    I retired from FCI having EPS 95 pension Rs.2712/-PM. FCI introduced DPCS PENSION BY CONTRIBUTION OF EMPLOYEE 2℅ & FCI CONTRIBUTION 10℅ OF FCI. THIS PENSION WAS GIVING TOTAL CORPUS TO LIC,SBI,HDFC & OTHER FINANCIAL INSTITUTIONS. GIVING PENSION TO THE EMPLOYEE FIXED BY THESE FINANCIAL INSTITUTIONS OR IN THE TERMS OF ANNUITY PENSION. MY TOTAL DCPS PENSION/ ANNUITY WAS FIXED RS.3990/-
    MY QUESTION IS THAT THIS IS PENSION & COMES UNDER HEAD SALARY / PENSION WHILE GILLING ITR.
    MY TOTAL CONTRIBUTION MY/ FCI SHARE APPROX. RS.730435/- AFTER MY DEATH SAME AMOUNT WILL BE GIVEN TO MY SPOUSE AFTER HER THE CORPUS SHARE WILL BE PAID TO NOMINEE. I CAN’T WITHDRAW DURING MY LIFE.
    IS THIS AMOUNT COMES WHILE FILLING ITR COMES UNDER HEAD PENSION. IN THE FCI SITE IT IS SHOWING DEPS I.e.pension
    .

  • Vipin Kumar Verma says:

    If individual having income I.e taxable is below Rs.one lakh only P.A.from eps 95 pension Or bank FD interest.Then it is compulsary to file ITR. If he / she filing ITR in previous years. But in future Total/ Taxable income is below Rs.one lakh only.Non filling of return is having penalty or not
    Secondly:- These rules are applicable to both Resident and Non resident individuals whose net taxable income is below Rs.one lakh only. To avoid financial loss in e filling as well lot of work of CPC Bangalore etc.
    Kindly clarify at the earliest.

  • Kailash says:

    Dear Sir,
    Explain in simple formula concern tax after 60 years age:-
    A person contributed in various scheme to get an interest of RS. 500000/- in a year.
    Do he or she have to pay income tax on it as he don’t have any other sources of income?

  • KANCHAN says:

    On CNBC AWAAZ TV CHANNEL ON Dt. 19.02.2020 IT WAS CLEARLY MENTIONED AT TAX GURU PROGRAMME THAT IF A NRI HAS PPF A/C HE CAN CONTINUE BY PAY MINIMUM RS.500/- IN PPF A/C TILL COMPLETION OF 15 YEARS. IS IT RIGHT.
    SECONLY, MY QUESTION IS THAT IF NRI HAS OPENED MONTHLY INCOME SCHEAM FOR RS.4 LAKH WITH 2ND JT.NAME HIS MOTHER & MOTHER i.e. 2nd Jt. GETTING MONTHLY INTEREST & SAME IS THE CASE OF NSC/KVP PURCHASED BY MOTHER IN HIS SONS NAME WHO IS NRI BY SIGNING HERSELF . PLEASE TELL ABOUT YOUR TETORIAL ON THIS IN DETAILS.

  • Vipan kumar verma says:

    Kindly send details of NRI income exemtion limit. From what income Tax he should file if income from intetest.The intetest income/ Gross taxable income is only below Rs.50000/- P.A. is NRI IS EXEMPTED TO FILE ITR OR WHICH ITR NRI SHOULD FILE F.Y 2019-20.

  • Sati kinkar Bhattacharya says:

    has the 80C and 80TTB clubbed
    I. FY 19-20

  • yogesh modi says:

    What about tds if salary is more than Rs .2.50 / lakh per annum of employee ??
    Should employer has to deduct TDS. ?? [Salary between Rs. 2.50 lakh to Rs.5.00 lahh] ??

  • Tubai Ghosh says:

    Hey Sreekanth, I do not see u have provided correct calculation here. For the 1st picture, a salaried employee having gross income of 600000, after deduction NTI is 400000. Then if you consider flat deduction of 250000 (bcoz tax is 0 between 0-250000 bracket), then taxable income becomes (400000-250000) = 150000. And tax becomes (150000*5)/100 = 7500. And this 7500 comes under 87A. Whereas u are showing the tax amount as 12500, which is wrong. Please do not put incorrect data if you are not sure. This makes people confused who are reading the article.

    • Sreekanth Reddy says:

      Dear Tubai,
      Thank you for highlighting the mistake, I stand corrected, updated the image. Keep visiting ReLakhs!

    • ashok Ivan Rodrigues says:

      Dear Tubai Ghosh Thanks a lot. I have still some doubts. To get my net Taxable Income amount can i consider these Components. 1) Standard Deduction -Rs. 50000 2) Under 80 C- Rs. 150000 3) HRA – Rs. 80000 (Rent paid during the Year) 4) Exemption for all citizens below 60 years- Rs. 250000. (50000+150000+80000+250000= 530000)

    • vipan kumar says:

      RELAKH IS NOT ANY CERTIFIED CHARTED ACCOUNTANT/ ICWA/ CO.SECRETRAY. HE IS JUST ADVERTISING THE TO THE PUBLIC.

      • Sreekanth Reddy says:

        Dear Vipan,
        Yes, we are not CAs/CWAs.
        But, unable to understand your second point??

        • VIPAN KUMAR VERMA says:

          second point is just to advertise public issue of shares/debentures & fixed dedosit of the companies where in handsome commission paid to brokers such as you, Inocent investor traps into your advertisement of company & invest their hard earned money in old age.

          • Sreekanth Reddy says:

            Dear VIPAN,
            We do agree that we are not an expert in taxation matters.
            However, we do not accept your allegation that we are an intermediary/broker.

            Do note that we are not associated with any financial product or service provider. We do not have anything to SELL here through this platform!

  • K.S.Singh says:

    sir I am senior citizen and i am earning through contractual service other than pension.
    Shall I entitled to avail standard deduction and contractual earning where to show in return form.

    • Sreekanth Reddy says:

      Dear Mr singh,
      If your earnings are considered as ‘Salary’ then you can claim Standard deduction.

      “If there is no employer-employee relationship, income won’t be taxed under head Income from Salaries..’

  • albin says:

    Hi

    I am 30 years age, NRI , Married. I heard that ICICI launched a new NFO called ICICI Prudential Retirement Funds (Equity and Debt Plans) – As of now, I havent started any investment for my retirement which is almost 20 years far itself..What do u think about this ICICI NFO(Equity plan)? Should I choose this? Please share ur thoughts..
    Also Do u have any article regarding NFO investment?

  • D C AHUJA says:

    Sir when income limit itself raised to 5 lakh then why and how rebate of 87a will work

  • RP says:

    In case if one’s taxable income from sources other than dividend is say Rs 2 lakhs but income from long term equity shares on which STT is paid is Rs 2 lakhs , since now on such LTCG exceeding Rs 1 lakhs one has to pay 10% tax, in the aforesaid example can one get benefit of section 87A & not pay any income tax for FY2019-20

    • Sreekanth Reddy says:

      Dear RP,
      As mentioned in the above article, Income Tax Rebate is allowed to be claimed from the total tax payable. So, the exemptions and deductions are allowed to be claimed from all types of Income (including Capital Gains) and Rebate is allowed from the tax payable.

      Hence, I believe that one can claim the tax benefit of Rebate u/s 87A.

      (Same response is applicable for the below query as well)

  • RP says:

    In case if one’s taxable income from sources other than dividend is say Rs 2 lakhs but dividend income is say Rs 11 lakhs, since now on dividend exceeding Rs 10 lakhs one has to pay 10% tax, in the aforesaid example can one get benefit of section 87A & not pay any income tax for FY2019-20

  • VIPAN KUMAR VERMA says:

    IN YOUR CHART YOUR GOOD SELF CALCULATED TDS FOR ABOVE 60 YEARS (PENSIONER) RS.68000/- MY QUESTION IS THAT INCOME TAX EXEMPTION RS.500000/- ABOVE 80 YEAR i.e.VERY SR.CITIZEN. YOUR GOOD SELF STATED > 60 YEARS. IS IT RIGHT OR WRONG ON YOUR PART.CHART SHOWING SALARIED,PROFESSIONAL& > 60 YEARS SHOWN ABOVE.

    • Sreekanth Reddy says:

      Dear VIPAN ji,
      In the illustration, it has been assumed that the Tax assessee is a Senior citizen and not Very Senior Citizen. (Let me add the assumption in the article). Thank you!

  • Veerendra kumar says:

    Sir I from Bangalore I apply in online for pf and pension form 16 and 10c status total amount approved claim status a/n I apply 16.1.2019 what can do for that

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