Example of tax rebate u/s 87A for FY 2025-26 (AY 2026-27)
Here is an example of US 87A rebate for FY 2024-25 (AY 2025-26):
Total Annual Income (Rs.)
|
Tax Payable before Cess
|
Rebate Under Section 87A
|
Tax Payable+4% Cess
|
Rs. 2.65 lakhs
|
Rs. 750
|
Rs. 750
|
0
|
Rs. 2.7 lakhs
|
Rs. 1,000
|
Rs. 1,000
|
0
|
Rs. 3 lakhs
|
Rs. 2,500
|
Rs. 2,500
|
0
|
Rs. 3.5 lakhs
|
Rs. 5,000
|
Rs. 2,500
|
Rs. 2,500 + cess**
|
What is the limit of rebate under Section 87A for previous financial years?
Financial year
|
Total income taxable limit
|
Rebate under Section 87A
|
2025-26 |
New Tax Regime: Rs. 12 lakhs |
Rs.
60,000 |
2024-25
|
New Tax Regime: Rs. 7 lakhs
|
Rs. 25,000
|
Old Tax Regime: Rs. 5 lakhs
|
Rs. 12,500
|
2023-24
|
New Tax Regime: Rs. 7 lakhs
|
Rs. 25,000
|
Old Tax Regime: Rs. 5 lakhs
|
Rs. 12,500
|
2022-23
|
Rs. 5 lakhs
|
Rs. 12,500
|
2021-2022
|
Rs. 5 lakhs
|
Rs. 12,500
|
2020-2021
|
Rs. 5 lakhs
|
Rs. 12,500
|
2019-2020
|
Rs. 5 lakhs
|
Rs. 12,500
|
2018-2019
|
Rs. 3.5 lakhs
|
Rs. 2,500
|
2017-2018
|
Rs. 3.5 lakhs
|
Rs. 2,500
|
2016-2017
|
Rs. 5 lakhs
|
Rs. 5,000
|
2015-2016
|
Rs. 5 lakhs
|
Rs. 2,000
|
2014-2015
|
Rs. 5 lakhs
|
Rs. 2,000
|
2013-2014
|
Rs. 5 lakhs
|
Rs. 2,000
|
Also read: 1940 TDS
Steps to claim rebate under section 87A rebate in ITR filing?
To claim a tax rebate under Section 87A for the Financial Year 2025-2026, follow these steps:
- Step 1: Determine your Gross Total Income for the Financial Year 2025-2026.
- Step 2: Subtract any tax deductions you are eligible for, such as those for life insurance policies, investments, and other tax-saving instruments.
- Step 3: Calculate your total income after subtracting the tax deductions available under IT Act, 1961.
- Step 4: Declare your Gross Income and tax deductions while filing your Income Tax Return (ITR).
- Step 5: After filing your ITR, you can claim a tax rebate under Section 87A.
Things to remember while availing rebate under section 87A
Taxpayers claiming a rebate under section 87A must keep in mind the following points:
Compliance with tax laws:
Ensure compliance with all relevant tax laws and regulations while claiming the rebate. This includes filing your Income Tax Return (ITR) on time, accurately reporting income, and correctly applying for deductions. Non-compliance can lead to penalties, fines, or disqualification from receiving the rebate.
Accurate calculation:
Calculate the rebate amount diligently to avoid any discrepancies in tax filing. Any miscalculations or errors in determining your tax liability can result in discrepancies, potentially leading to delays or issues with your tax filing.
Keep documentation:
Maintain proper documentation of income, deductions, and tax payments for seamless filing and claim of rebate. This documentation will support your rebate claim, facilitate seamless ITR filing, and provide evidence in case of an audit or query from tax authorities.
Review eligibility:
Regularly review eligibility criteria and any changes in tax laws to maximise benefits. Staying informed about updates will help you maximise your tax benefits and ensure that you meet all requirements to claim the rebate effectively each financial year.
Rebate amount
- Eligible amount: The rebate is applicable to the total income tax liability calculated before the addition of the 4% health and education cess.
- Calculation: The rebate amount is determined as the lesser of:
- The rebate limit specified under Section 87A of the Income Tax Act.
- The total income tax payable (prior to cess calculation).
Applicable tax liabilities
The rebate may be claimed against tax liabilities arising from:
- Income taxed at slab rates: Tax levied on normal income under applicable tax slabs.
- Long-term capital gains: Tax on long-term capital gains as per Section 112 of the Income Tax Act, excluding gains from listed equity shares and equity-oriented mutual fund schemes.
- Short-term capital gains: Tax on short-term capital gains from listed equity shares and equity-oriented mutual fund schemes under Section 111A, taxed at a flat rate of 15%.
Non-applicable tax liabilities
The rebate provided does not apply to the tax levied on long-term capital gains derived from investments in equity shares and equity-oriented mutual funds, as outlined in Section 112A of the Income Tax Act.
In conclusion, there is a significant tax relief under section 87A, particularly those with modest incomes. By reducing the tax burden on eligible individuals, this provision promotes tax compliance and financial inclusivity. Taxpayers are encouraged to leverage the benefits offered under section 87A by adhering to the prescribed criteria and procedures.
Conclusion
The Section 87A tax rebate offers a valuable opportunity to reduce your tax liability. By understanding the eligibility criteria and maximizing deductions, you can potentially minimize your tax burden. Furthermore, investing in health insurance can provide significant tax benefits under Section 80D, further enhancing your tax savings. Don't miss out on these opportunities to optimize your finances and secure your future.