Claim Tax Rebate Under Section 87A of Income Tax Act AY 2024-25

Section 87A of the Income Tax Act provides a tax rebate to Indian resident taxpayers up to a certain income. It is basically a reduction in the total tax amount payable by an individual.

For the FY 2024-25, eligible taxpayers earning up to ₹7 lakhs per year can claim a rebate of up to ₹25,000 or total payable tax, whichever is less. It is for the new tax regime.

Under the old tax regime, the rebate amount is ₹12,500, while the tax rebate limit is reduced to ₹5 lakhs.

Income Tax Rebate - Old Tax Regime

you have a taxable income of not more than ₹5 lakhs and opted for the old tax regime, then your tax rebate amount is ₹12,500 as per IT section 87A.

If you want to claim this rebate, your tax obligations must be less than ₹12,500.

Income Tax Rebate - New Tax Regime

If you have opted for the new tax regime and have a taxable income of not more than ₹7 lakhs, then you can claim a rebate of ₹25,000.

If your gross income exceeds ₹7 lakhs and the total payable tax amount is higher than your gross income and the amount of ₹7 lakhs, then you may be eligible for marginal/partial tax relief.

You must be a resident of India.

You are a senior citizen of more than 60 years but less than 80 years of age.

If you are above 80 years of age, you can not claim a tax rebate under the income tax section 87A.

The tax rebate amount is calculated on the total payable tax before adding the education and healthcare cess of 4%.

Your total income must not exceed the threshold limit of ₹5 lakhs or ₹7 lakhs (under the new tax regime).

The following table demonstrates how tax rebate is calculated for different salaries under the new tax regime:

Step 1: Calculate your gross income for FY 2024-25.

Step 2: Eliminate tax exemptions and deductions you are eligible for. Some examples are medical insurance plans, tax-free savings schemes, etc.

Step 3: Determine your income after subtracting all the deductions available under the Income Tax Act of 1961.

Step 4: File an ITR to declare your gross total income, tax deductions, and other tax liability.

Step 5: Once your income tax return is filed, your 87A rebate will also be claimed automatically.

Meet Your Eligibility Criteria: Before filing for a tax rebate under section 87A of the Income Tax Act, make sure to check your eligibility for the said provision.

As mentioned above, rebate u/s 87A is only available for Indian residents. Moreover, senior citizens between 60 to 79 years of age are also eligible for rebates.

Opt for the Right Tax Regime: An income tax rebate is available with both new and old tax regimes.

However, the rebate amount is different in each regime. Hence, make sure to choose your tax regime wisely if you want to maximise your tax savings.

Check the Tax Rebate Amount: Tax rebate is calculated on the entire payable tax. Note that the rebate calculation does not include an education and health surcharge of 4%.

Also note that the rebate amount is either the specified rebate limit or the total payable tax, whichever is lower.

For instance, if your total payable tax is ₹35,000 and you have chosen the new tax regime, then your payable tax becomes ₹10,000 after applying a rebate of ₹25,000.

Check the Applicable Tax Obligations: Before claiming your tax rebate, check out the liabilities against which you can make a claim.

As of now, you can claim tax rebate on your normal income and long-term capital gains.

Note that the short-term capital gains on specified investment instruments are subject to a flat tax of 15%.

Check Non-applicable Tax Obligations: It is also crucial to check the tax liabilities for which you can not claim relief under IT section 87A.

It includes LTCGs on equity shares and mutual funds u/s 112A.

Tax rebate under section 87A of the IT Act is an important tax provision that allows taxpayers with low income to minimise their tax liabilities.

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