Taxpayers Alert! Last Date To Claim Tax Rebate Under Section 87A; Eligibility, Benefits, And How To Claim?

Income Tax Alert: The last date to file a revised income tax return (ITR) is on Wednesday, January 15, and this will eventually be the deadline for claiming tax rebates under section 87A. The Income Tax department has released Excel utilities in two major forms ITR2 and ITR3 for enabling taxpayers to claim the tax rebate. Notably, taxpayers will have to complete the process manually.

Taxpayers will have to edit the tax rebate column manually in the ITR Excel utilities. Once done, they will have to validate for claiming the tax rebate under section 87A.

Tax rebates under section 87A have been in the limelight since the IT department modified ITR software in July last year, which a result, made it difficult for many taxpayers to claim section 87A tax rebates, especially in the cases of ITR filing for short-term capital gains or equity shares. The issue was taken to the court eventually.

Later, the IT department granted interim relief after the Bombay High Court directed them 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.

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:

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)