Income tax rebate under section 87A is allowed to:-

  • Resident Individuals.
  • If his/her total income is up to Rs. 5 Lakhs after deduction all permissible deduction under section 80 for financial year 2016-17 and R. 3.50 Lakhs for financial year 2017-18.
  • The rebate is allowed to senior citizens also.

For financial year 2016-17 the amount of rebate under section 87A is Rs.5000/= and for financial year 2017-18 the amount of tax rebate is Rs. 2500/=.

Illustration:

During Financial Year 2016-17, Mr. X who is 52 years old, has the following details in respect of his income and investments in tax saving schemes:-

Income from business                                     RS.645000/=

Interest from saving bank accounts                   Rs.12500/=

Amount deposited in PPF A/c                          RS.150000/=

Life Insurance Premium paid                             RS.20000/=

Mediclaim Insurance Premium                           Rs.20000/=

Calculate the amount of income tax to be paid by Mr. X?.

Solution:-

Income from business                                                           Rs.645000/=

Interest from saving bank account                                          Rs.12500/=

Gross total income                                                                Rs.657500/=

Less: Deduction under Chapter VI-A

Deduction u/s 80-C

Amount deposited in PPF A/c                      RS.150000/=

Life Insurance Premium paid                         Rs.20000/=

Total deduction u/s 80-C                              Rs.170000/=

Gross deduction u/s 80-C restricted to                            Rs.150000/=

Deduction u/s 80-D

Mediclaim Insurance Premium paid          Rs.20,000/=          Rs.20000/=

Deduction u/s 80TTA

Interest from saving bank account                                          Rs.10000/=

Net Taxable Income                                                               Rs.477500/=

Tax on above

Up to Rs.250000/=                            NIL

On Balance of Rs. 227500/= @ 10%                                      Rs.22750/=

Less: Rebate u/s 87A                                                                Rs.5000/=

Net tax payable                                                                        Rs.17750/=

Add: Education Cess @ 2% on Rs.20750/=                              Rs.351/=

Add: Secondary & Higher Education Cess @ 1% on Rs.20750/=  178/=

Total Tax Payable                                                                     Rs18279/=

Clarifications:

  • Deduction u/s 80C is allowed maximum up to Rs.150000/=. If investment under section 80C is less than Rs.150000/=, then the actual amount will be allowed for deduction.
  • Deduction under section 80D in respect of Medicalim insurance premium, maximum deduction is allowed up to Rs.25000/= for individual who is not a senior citizen and for senior citizen, deduction in respect of mediclaim insurance premium is Rs.30000/=. Senior citizen means a person who has completed 60 years during the relevant financial year.
  • Deduction under section 80TTA is allowed up to Rs.10000/= irrespective of the income of individual.
  • Rebate of Rs.5000/= is allowed if the total taxable income of an individual is up to Rs.500000/=. In above case total taxable amount is Rs.477500/=.

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