In India, if you come under the income tax slab then congratulations! As much as you hate paying taxes, you should consider yourself lucky that you are earning enough that you have been asked to pay taxes. It might come as a surprise to you but as per 2018-19 reports, tax-GDP ratio of the country (after including the Centre and states’ tax revenue) was 17-17.5 per cent. This means that only a very few people in India end up paying taxes.
As responsible citizens of the country, it is our duty to pay income tax. For understanding how much Income Tax you are supposed to pay, you should check the current Income Tax slab list. As per the current list the lowest tax slab is that of above 2.5 lakhs and below 5 lakhs. What do you do if you fall under this particular income category? Let’s introduce you to section 87A of the Income Tax act.
What is Section 87A of the Income Tax act?
Section 87A is a section of the Income Tax Act that was introduced in the Finance Act in 2013. The section was introduced to provide benefits to individuals whose total net income is below Rs.5 lakhs.
The Section 87A of the Income Tax Act would make sure that taxpayers, whose net taxable income is up to Rs.5 lakhs don’t have to pay any income tax. To allow for this to happen, an existing section, 87A was updated in the Income Tax Act.
The previous laws made way for a Rs.2,500 income tax rebate but, the updated law ensured that the limit was increased to a Rs.12,500 income tax rebate. It is important to understand that this rebate holds good only for taxpayers whose annual taxable income is below the mentioned threshold limit. If you exceed the limit, you cannot avail the rebate u/s 87A.
Eligibility criteria to avail the tax rebate under section 87A
In order to avail the tax rebate u/s 87A, you need to make sure that you are meeting the following criteria:
- This rebate can only be availed by the INDIVIDUAL taxpayers. If a person belongs to a HUF, AOP/BOI, firm or a company, he/she cannot avail this rebate.
- The rebate is available irrespective of the gender of the person. Men and women can both avail the benefits.
- Total Income after deductions (under Section 80) should not exceed Rs 5 lakhs.
- The laws make way for a maximum rebate of Rs.12,500 under this section. This means that if the taxes that you are liable to pay is Rs.12,500 or less, you can avail the rebate.
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