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New Rebate under Sec 87A of IT Act 1961

New Section 87A of the Income Tax Act, 1961
Inserted by Finance Bill, 2013-14

                   In the Budget 2013 Speech, The Finance Minister had said, “Nevertheless, I am inclined to give some relief to the tax payers in the first bracket of Rs. 2 Lakh to Rs. 5 Lakh. Assuming an inflation rate of 10% and a notional rise in the threshold exemption from Rs. 2,00,000/- to Rs. 2,20,000/- I propose to provide a tax credit of Rs. 2,000/- to every person who has a total income upto Rs. 5 Lakh”.
                A tax rebate of Rs 2,000 from tax calculated will be available for people having an annual income upto Rs 5 lakh.   However, this benefit of Rs2,000 tax credit will not be available if you cross the income range of Rs 5 lakh.  Thus we can say that tax payable in 10% slab will be maximum Rs28,000 (taking into account Rs 2000 tax credit), but for people who fall in income range of Rs.5 lakh and above, the tax will be Rs30,000 + 20% tax on income above Rs 5 lakh;

As stated by the Finance minister above, the detailed explanation of the newly inserted section is mentioned below:
  • The above amendment was bought by inserting a new Section 87A in the Income Tax Act, 1961.
  • It is to be noted that, the above amendment does not mean that basic Exemption Limit has been raised from Rs. 2,00,000/- to Rs. 2,20,000/-.
  • It is a Rebate and not a deduction, meaning an assessee will get reduction in the “Income tax payable” by him.
  •  It is available ONLY to an ‘INDIVIDUAL’ assessee, resident in India who’s “Total Income” during the PY does not exceeds Rs. 5 Lakh.
  • However, the above rebate benefit is not applicable to a super senior citizen, since he is already fully exempted up to Rs. 5 lakh.
  • It is applicable for Assessment Year 2014-15 and thereafter. (Financial Year 2013-14)
  • This Rebate not available to a Non resident individual.
  • If the total tax payable is less than Rs. 2000/-, rebate is restricted to “total tax payable”.

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