Full Income Tax Rebate u/s 87A for Individuals AY 2022-23: Income upto 5 Lacs

Section 87A of the Income Tax Act, 1961, provides for a 100% tax rebate if the income tax liability is up to Rs. 12,500 in respect of AY 2022-23 for resident individuals with taxable income up to Rs. 5,00,000.

The tax rebate u/s 87A has been increased by the Finance Act, 2019, from Rs. 2,500 to Rs. 12,500, applicable in the case of resident individuals having taxable income up to Rs. 5 lacs from AY 2020–21 and on. Earlier, Section 87A was introduced by the Finance Act 2017, and tax relief of up to Rs. 2,500 was available to resident individuals having taxable income up to Rs. 3.5 lacs.

During his presentation of the 2019 budget, Finance Minister Sh. Piyush Goyal said that the increased rebate will help about 3 crore middle-class taxpayers. These taxpayers include self-employed people, small businesses, small traders, salary earners, pensioners, and senior citizens.

Section 8 of the Finance Act of 2019 made the following changes to Section 87A of the Income Tax Act of 1961:

“As of April 1, 2020, the following changes will be made to section 87A of the Income Tax Act:

(a) For the words “three hundred fifty thousand,” the words “five hundred thousand” shall be substituted;

(b) For the words “two thousand and five hundred,” the words “twelve thousand and five hundred” shall be substituted.

Accordingly, a resident individual having total income up to Rs. 5,00,000 can claim a full tax rebate of up to Rs. 12,500 u/s 87A in the form of a deduction from their tax liability, applicable from AY 2020–21 and onwards. In other words, the rebate u/s 87A shall be 100% of income-tax liability or Rs. 12,500, whichever is lower, for resident individuals having total income up to Rs. 5,00,000. But this rebate won’t be given if the taxable income is more than Rs. 500,000.

As a result of the enhanced tax rebate, individuals who make investments of up to Rs 150,000 and are eligible for deduction u/s 80C will have a tax-free income of up to Rs 650,000, which may be further increased with other available deductions and exemptions, like interest on home loans up to Rs 200,000, interest on education loans, NPS contributions, medical insurance premiums, medical expenses for senior citizens, and so on.

Related Posts: >> Finance Act, 2022 <<

Income Tax Slabs/ Rates:Income Tax Cess, Surcharge & Rebate
Resident IndividualsEducation Cess Rates
NRIs/ HUFs/ AOP/ BOI/ AJPSurcharge Rates
Partnership Firms and LLPsMarginal Relief from Surcharge
Domestic CompaniesRebate u/s 87A for Individuals
Foreign Companies 
Co-operative Societies 
Local Authorities 

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