Good News For Taxpayers! Now, You Can Claim Tax Rebate Under Section 87A; Eligibility, Benefits, How To Claim?

Income Tax Return Filing: The income tax department is now allowing eligible taxpayers to claim tax rebates under its section 87A for the financial year 2023-24. The decision comes after the Bombay High Court directed the IT department to extend the due date for claiming the benefit. Taxpayers can claim their rebate in section 87A by filing of belated or revised income tax return. Notably, the latest benefit applies only to ITR-2 and ITR-3 forms.

Individuals and HUFs not having income from business or profession [and not eligible for filing ITR Form-1 (Sahaj)] can file ITR-2, while those having income from business or profession can file ITR Form-3.

What Is Rebate Under Section 87A?

As per the Income Tax Department guidelines, an individual who is a resident of India and whose total income does not exceed Rs. 5,00,000 is entitled to claim a rebate under section 87A​. Rebate under section 87A is available in the form of a deduction from the tax liability.

Under section 87A, the rebate will be lower by 100% of income-tax liability or Rs. 12,500. In other words, if the tax liability exceeds Rs. 12,500, a rebate will be available to the extent of Rs. 12,500 only and no rebate will be available if the total income (i.e. taxable income) exceeds Rs. 5,00,000.

Furthermore, there is a maximum tax rebate of Rs 25,000 under section 87A, from the amount of income tax on total income, which is chargeable to tax under section 115BAC(1A). However, this rebate is allowed if the total income of the assessee chargeable to tax under section 115BAC(1A) is up to Rs. 7,00,000.

Moreover, if the total income chargeable to tax exceeds Rs. 7,00,000 and the tax payable on such income exceeds the difference between the total income and Rs. 7,00,000, he can claim a rebate with marginal relief to the extent of the difference between the tax payable on such total income and the amount by which it exceeds Rs. 7,00,000.

Eligibility To Claim 87A Tax Rebate For FY23-24:

First, the taxpayer should be a resident individual. Secondly, his or her total income should not exceed Rs 5 lakh in a financial year, after reducing the deductions in sections like 80C, 80D and others.

How To Claim Section 87A Rebate:

The process to claim the section 87A rebate is through filing ITR either online or offline mode.

The main deadline to file an ITR has ended on July 31, 2024, however, the government has extended the deadline to file a belated or revised ITR till January 15.

According to ClearTax, the steps to claim a tax rebate under section 87A are:

- Calculate your gross total income for the financial year

- Reduce your tax deductions for tax savings, investments, etc.

- Arrive at your total income after reducing the tax deductions.

- Declare your gross income and tax deductions in ITR.

- Claim a tax rebate under section 87A if your total income does not exceed Rs 7 lakh under the new tax regime & 5 lakh for the old tax regime (shifting out of the default tax regime)

- The maximum rebate under section 87A for the AY 2024-25 is Rs 25,000 under the new tax regime and Rs 12,500 under the optional tax regime.