The benefit of Section 87A is available to the assessee only when three conditions are met in the financial year 2019-20. It remains to be seen what the Union Budget 2019 India proposes.
Budget 2019: Interim budget presented by Finance Minister Piyush Goyal in February 2019 had brought about some relief to the taxpayers earning less than Rs 5 lakh. It was made effective even without bringing in any revision in the income tax slabs. Now, all eyes will be on the newly appointed Union Minister of Finance Nirmala Sitharaman’s Budget 2019.
While the income slabs remained as it is in in February 2019 Budget, the provision of rebate did the trick. Under section 87A of the Income Tax Act, a rebate up to a maximum of Rs 12,500 was allowed to the tax payers. Earlier, this rebate was available to a resident individual if his total income did not exceed Rs. 3.5 lakh. The amount of rebate was 100 per cent of income tax or Rs. 2,500, whichever is less. The February Interim Budget raised the limit to Rs 5 lakh and capped it at a maximum rebate of Rs 12,500 for the financial year 2019-20.
The benefit of Section 87 A is available to assessee only when these three conditions are met in the financial year 2019-20 – Firstly, it is only for resident individuals, secondly, the total income after taking into account any deductions, has to be below Rs 5 lakh and thirdly, the maximum rebate allowed will be Rs 12,500.
According to the income tax rules, Section 87A states that, “An assessee, being an individual resident in India, whose total income does not exceed Rs 5 lakh, shall be entitled to a deduction, from the amount of income-tax (as computed before allowing the deductions) on his total income with which he is chargeable for any assessment year, of an amount equal to hundred per cent of such income-tax or an amount of Rs 12,500, whichever is less.”
For those whose income is above Rs 5 lakh, they may make use of the deductions available such as section 80C and Section 80D to reduce their taxable income. If it falls within Rs 5 lakh, even they can be entitled to the rebate under section 87A.
The budget in February could be said to be a prelude to the Lok Sabha election. In the upcoming budget, it remains to be seen whether the rebate is extended to those with a taxable income above Rs 5 lakh with a cut-off limit or the income tax slabs itself are revised or more so, nothing is changed so as to avoid denting the government’s fiscal position further.