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Understanding Tax Rebate u/s 87A: AY 2023-24 and Beyond

OLD-VS-NEW

In India’s income tax realm, Section 87A offers a substantial tax rebate to eligible taxpayers. This article explores Tax Rebate u/s 87A for AY 2023-24 and beyond, in both the existing and new tax regimes, covering marginal relief, ineligible taxes, and more.

Understanding Tax Rebate u/s 87A: AY 2023-24 and Beyond

Tax Rebate under Section 87A for AY 2023-24 and Beyond in the Existing Regime

Eligibility and Key Provisions

Therefore, Section 87A of the Income Tax Act of 1961 provides a 100% tax rebate. Eligible resident individuals with up to Rs 500,000 taxable income for AY 2023-24 qualify. However, this rebate doesn’t apply if income exceeds Rs 500,000.

Therefore, Historical Perspective

In other words, Section 87A was introduced in 2017, offering up to Rs 2,500 tax relief for those with taxable income up to Rs 3.5 lakhs. In 2019, it was enhanced to Rs 12,500 for AY 2020-21 and beyond.

In other words, Calculating the Rebate

However, For residents with total income up to Rs 5,00,000, Section 87A allows a full tax rebate of up to Rs 12,500, or 100% of income-tax liability, whichever is lower. But crossing the Rs 500,000 income mark voids this rebate.

Enhanced Benefits

Under the existing regime, individuals can invest up to Rs 150,000 and still enjoy a tax-free income of up to Rs 650,000. For instance,  This can be increased with deductions like home loan interest, NPS contributions, and medical insurance premiums.

Tax Rebate under Section 87A for AY 2024-25 and Beyond in the New Regime

Higher Rebate under the New Regime

Above all, The Finance Act of 2023 introduces a substantial tax rebate for those choosing the new tax regime (Section 115BAC) in AY 2024-25 and beyond. In addition,  Individuals with up to Rs 700,000 total income can claim a tax rebate of up to Rs 25,000, making it an attractive option.

Marginal Relief for Tax Rebate u/s 87A

After that, In cases where tax liability exceeds income by a significant margin, marginal relief ensures taxpayers receive the full tax rebate of up to Rs 25,000, even with slightly higher income. Similarly, The calculation process resembles marginal relief from the surcharge.

Taxes Not Subject to Rebate u/s 87A

Specific Exclusions

However, Section 87A doesn’t apply to taxes on recognized provident funds (Section 111) or long-term capital gains from specific securities (Section 112A).

Incomes Not Qualifying for Tax Rebate

Long-term capital gains (LTCG) from equity shares and mutual funds aren’t eligible for the tax rebate. LTCG exceeding Rs 1 lakh faces a 10% special tax rate.

In Conclusion

Section 87A offers substantial tax rebates based on income and the chosen tax regime. Stay informed and consult a qualified tax professional to optimize your tax planning and minimize your tax liability under Section 87A.

FAQs

  1. Who is eligible for the tax rebate under Section 87A?
    • Resident individuals with a taxable income of up to Rs 500,000 (existing regime) and up to Rs 700,000 (new regime) qualify.
  2. What is marginal relief in Section 87A?
    • Marginal relief ensures full tax rebate availability, even with slightly higher income.
  3. Which taxes are not subject to rebate under Section 87A?
    • Taxes on recognized provident funds (Section 111) and long-term capital gains from specific securities (Section 112A).
  4. What is the impact of LTCG from equity shares and mutual funds on the tax rebate?
    • LTCG exceeding Rs 1 lakh faces a special 10% tax rate, regardless of the rebate.
  5. How can I optimize my tax planning under Section 87A?
    • Consult a qualified tax professional to understand eligibility and maximize benefits.