NO TAX UPTO Rs.7,00,000, REBATE U/S 87A
31 March is coming closer and most of the people have started to invest their money, in one or the other options. But the main purpose, why most of the people invest is, they want to reduce their tax liability as maximum as possible and to ensure proper tax planning, you must have an idea about sec 87 A, now the question is.
What is Sec 87A ?
87 A is one of the most beneficial section for the taxpayer who is a resident in India, Sec 87 A provided tax benefit to an individual if their taxable income does not exceed the threshold limit as prescribed under this section, this limit is different under both new and old regime, or in other words if your taxable income is under the threshold limit as prescribed under 87A, you don’t need to pay any tax, because you will get the benefit of tax rebate.
Now the question is, what is the threshold limit ?
Under Old regime – For taxpayers who have opted for old regime, their threshold limit is Rs.5,00,000. It means that if your taxable income is up to Rs.5,00,000 you don’t need to pay any tax.
Rebate u/s 87A for old regime is available up to 100% of tax amount or Rs.12,500 whichever is lower, because up to Rs. 2,50,000 there is no tax liability and from Rs.2,50,000 to 5,00,000 rate is 5%. The tax amount comes out to be Rs.12,500. Hence if your taxable income is up to Rs.5,00,000 you will get rebate of Rs.12,500 and if its below 5,00,000 like 3,00,000 or 4,00,000 etc. you will get 100% rebate of tax amount, up to a max of Rs. 12,500 which is the threshold limit under old regime.
What if my taxable income exceed 5,00,000 ? Do i need to pay tax above Rs. 5,00,000 only ?
The Answer is NO, If your taxable income exceed the threshold limit of Rs.5,00,000. Then you need to pay tax on the whole amount, i.e. firstly from Rs. 2,50,000 to 5,00,000 and then from Rs. 5,00,000 to Exceeded income amount.
Under New regime – For taxpayers who have opted for new regime, their threshold limit is up to Rs.7,00,000. Which means if their taxable income is up to Rs.7,00,000, they don’t need to pay any tax and rest of the concepts are same as above.
How to calculate tax rebate U/S 87 A
- First of all calculate your gross total income.
- Reduced deductions under Sec 80 and any other deduction.
- Calculate income after reducing deductions
- If you income is below Rs.5,00,000 in old regime and Rs.7,00,000 in new regime. You don’t need to pay any tax, as you will get benefit of tax rebate