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ARN. No. KLI/23-24/E-BB/1201
Features
Ref. No. KLI/22-23/E-BB/999
Section 87A of the Income Tax Act provides a tax rebate of up to ₹25,000 for resident individuals with a taxable income of ₹7,00,000 or less under the new tax regime.
As a taxpayer in India, navigating the complications of the Income Tax Act and seeking ways to optimize your tax liabilities can be challenging. One notable provision that can significantly benefit you is the rebate offered under Section 87A.
In both the preceding and current income tax structures, there has been no alteration in the rebate amount granted under Section 87A for the fiscal years 2021-22 and 2022-23 (Assessment Years 2022-23 and 2023-24). If you have a taxable income of up to ₹5,00,000, you remain eligible for a tax rebate of ₹12,500, or the amount of tax payable (whichever is less).
However, there has been a modification in the rebate amount under Section 87A for the fiscal year 2023-24 (Assessment Year 2024-25) under the new income tax regime. If you have a taxable income of up to ₹7,00,000, you will receive a tax relief of ₹25,000. It is worth noting that the rebate under the former tax regime remains consistent, i.e., ₹12,500 for income up to ₹5,00,000.
An income tax rebate is a refund on taxes that you have already paid to the government. Think of it as the government giving you a little bit of your money back. This happens when you’ve paid more taxes than what you actually owe. The excess amount is returned to you in the form of a rebate.
Now, why would you pay more taxes than necessary? Well, it could happen due to various reasons. For instance, you might have made tax-saving investments after your employer deducted taxes from your salary, or perhaps there were miscalculations when your tax liability was initially assessed. In any case, if your actual tax liability is less than what you’ve paid, you’re entitled to get that extra money back.
The Union Budget 2024 maintained the existing provisions for the Tax Rebate under Section 87A, leaving them unchanged. This means that eligible resident individuals in India can continue to benefit from a tax rebate of up to ₹25,000, effectively reducing their overall tax liability. To qualify for this rebate, an individual’s total taxable income must be ₹7,00,000 or less under the new tax regime. This provision offers substantial relief to small taxpayers, helping them manage their tax obligations more efficiently.
If an individual’s total taxable income is up to ₹7,00,000, they will be eligible for the following tax breaks under the new tax regime for the fiscal year 2023-24:
Outlined below are the procedures to avail of a tax rebate under Section 87A:
For individuals below 60 years of age for AY 2023-24:
Source of Income (FY 2023-24) |
Income (₹) |
Gross total income |
6,50,000 |
Less: Deduction* under section 80C |
1,50,000 |
Total income |
5,00,000 |
Income-tax (@ 5% from ₹2.5 to 5 lakh) |
12,500 |
Less: Rebate u/s 87A |
12,500 |
Tax payable |
Nil |
Consider the following points when utilizing the rebate under Section 87A:
Section 87A rebate can be claimed against tax liabilities on:
Individuals are eligible to avail of the rebate under Section 87A for the financial years 2023-24, provided the following conditions are met:
When it comes to managing your taxes, any opportunity to reduce your tax burden is worth exploring. One such opportunity that often flies under the radar is the tax rebate offered under Section 87A of the Income Tax Act. If you’re wondering how this rebate works and what you should keep in mind, let’s walk through the key points together in a simple, conversational way.
First things first, let’s talk about who can actually benefit from Section 87A. This rebate is specifically designed for resident individuals—sorry, non-residents, this one isn’t for you. The main criterion for eligibility is that your total taxable income should be ₹7,00,000 or less under the new tax regime. If your income falls within this bracket, you’re in luck! You can claim a rebate of up to ₹25,000 on your tax liability, which means you could end up paying little to no tax at all.
One thing to keep in mind is that the rebate under Section 87A is available only under the new tax regime. The new regime offers lower tax rates but with fewer exemptions and deductions. So, if you’re someone who prefers sticking to the old tax regime because of the various deductions available, you won’t be able to claim the rebate under Section 87A. It’s important to weigh the pros and cons of both regimes to see which one benefits you more.
Now, if you’re a senior citizen, you might be wondering if this rebate applies to you. The good news is that it does! Whether you’re under 60, between 60 and 80, or over 80, as long as you meet the income criteria and are a resident, you can claim this rebate. This can be particularly beneficial for those who are on a fixed income and looking for ways to minimize their tax outflow.
Another important thing to consider is how your various income sources affect your eligibility for the rebate. For instance, if you have income from salary, interest, or even capital gains, all of these will contribute to your total taxable income. If the sum of all these incomes is ₹7,00,000 or less, you’re good to go. But if your income exceeds this limit, even by a small amount, you won’t be eligible for the rebate. So, it’s crucial to keep track of all your income sources and plan accordingly.
One last thing to note: the rebate under Section 87A is not something you can carry forward to the next year. It’s a use-it-or-lose-it benefit. This means that if you don’t claim it in the year you’re eligible, you can’t save it for future tax filings. So, make sure you’re aware of your eligibility each year and take advantage of the rebate when you can.
As taxpayers embark on the journey of complying with the income tax regulations for FY 2023-24, they must be aware of provisions like Section 87A. Leveraging rebates can result in significant tax savings for eligible individuals and HUFs. However, it is advisable to seek professional advice or refer to the latest amendments in the Income Tax Act to ensure accurate and up-to-date information.
Understanding and optimizing tax benefits, such as the rebate under Section 87A, can contribute to a more tax-efficient financial plan for individuals and families in the upcoming financial year.
1
The rebate under Section 87A directly reduces your tax liability, not your taxable income. If your taxable income is ₹7,00,000 or less (under the new tax regime), you can get a rebate of up to ₹25,000, which lowers the tax you owe.
2
No, the rebate under Section 87A is only available to resident individuals. Non-resident individuals are not eligible for this rebate.
3
To claim the rebate under Section 87A, you need to calculate your total taxable income and ensure it is ₹7,00,000 or less under the new tax regime. The rebate is automatically applied when you file your income tax return online or manually.
4
Yes, the rebate under Section 87A applies to all resident individuals, including senior citizens, as long as their taxable income is ₹7,00,000 or less under the new tax regime.
5
Yes, you can claim the rebate under Section 87A even if you have income from capital gains, provided your total taxable income, including the capital gains, does not exceed ₹7,00,000 under the new tax regime.
1. Tax Benefits on Health Insurance Plans
2.How Much Should I be Paying for Health Insurance?
Pay 10,000/month for 10 years, Get 1,65,805/Year* for next 15 years.
ARN. No. KLI/23-24/E-BB/1201
Features
Ref. No. KLI/22-23/E-BB/999
The information herein is meant only for general reading purposes and the views being expressed only constitute opinions and therefore cannot be considered as guidelines, recommendations or as a professional guide for the readers. The content has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable. Recipients of this information are advised to rely on their own analysis, interpretations & investigations. Readers are also advised to seek independent professional advice in order to arrive at an informed investment decision. Further customer is the advised to go through the sales brochure before conducting any sale. Above illustrations are only for understanding, it is not directly or indirectly related to the performance of any product or plans of Kotak Life.