Are you paying extra Tax than needed? Here’s how you can refund!


When an individual pays more than his or her professional tax due, he or she receives a tax rebate, which is a refund on the amount paid. After the fiscal year, the extra funds are reimbursed. A professional tax return must be filed to obtain a tax refund.

In India, the Income Tax Act was adopted in 1961. It is the charging legislation in the country that governs the administration, levy, recovery, and collection of income tax. To simplify taxation and increase tax income, the government continually modifies, adds, and eliminates laws.

The IT Act also includes many provisions to assist taxpayers in lowering their professional tax payments. One such provision is the Section 87A tax refund.

Here’s all you need to know about this provision and who qualifies for it:

What Is Tax Rebate Under Section 87A?

A tax rebate is a form of a tax refund that a taxpayer is entitled to from the IT department when the tax paid or payable exceeds the actual professional tax burden. Individuals having taxable income of Rs. 5 lakhs or less are entitled to a tax credit of up to Rs. 12,500 under Section 87A.

If your taxable income is less than Rs. 5 lakh, you can seek a tax refund under Section 87A, which would result in no professional tax burden. All resident Indians, including older citizens, are eligible for the reimbursement.

It is worth noting that the income tax rebate provided under Section 87A has undergone several revisions since its inception in 2013.

Even as late as the fiscal year 2018-2019, the income tax credit under Section 87A was limited to Rs 2,500.

As a result, if your total taxable income exceeded Rs 3.5 lakhs and your tax due exceeded Rs 2,500, Section 87A could no longer provide you with professional tax relief.

When was Section 87A Introduced?

The Section 87A refund was initially suggested in 2013 and has been in force since then, with the most recent change being in 2019. According to the most recent Section 87A rules, every individual with an annual taxable income of up to Rs 5 lakhs is entitled to a Rs 12,500 income tax rebate.

This essentially means that persons with an annual income of less than Rs 5 lakhs are completely free from income tax and may effectively avoid income tax in India.

Difference Between Tax Rebate, Tax Deductions, And Tax Exemptions

As previously stated, a professional tax refund pertains to the amount of professional tax already paid or payable by a taxpayer. Tax exemptions, on the other hand, are claimed from specified sources of qualifying income. HRA deducted from Gross Total Income, for example, is not tax-deductible, although salary is.

You can claim deductions for certain investments or expenditures made from your income that are qualified under various IT sections. Deductions can be claimed on the Gross Total Income as well as on each Head of Income.

To put it simply, a rebate is claimed on the tax amount, whereas exemptions and deductions are claimed on the income.

Is Tax Rebate Under Section 87A Available For Fy 2021-22?

The new Finance Bill of 2020 includes an alternative lower rate income tax for people who fall between the 15% and 25% slab rates. Since the introduction of the Finance Bill 2019, taxpayers in the 10%, 20%, and 30% tax brackets have had the option of paying a lesser rate of professional tax.

Under the new tax structure, may taxpayers receive a tax rebate under Section 87A? Yes, the Section 87A rebate remains unchanged in the Finance Bill 2020, and qualifying taxpayers can claim a reimbursement of up to Rs. 12,500 if their taxable income in the fiscal year is up to Rs. 5 lakhs.

Eligibility to Claim Income Tax Rebate

The following are the qualifying requirements for claiming an income tax rebate under Section 87A of the Income Tax Act:

  1. Must be a resident of India
  2. Your overall income after considering deductions is less than Rs.5 lakh.
  3. The highest refund amount that may be claimed is Rs.12,500. So, if your entire tax due is less than Rs.12,500, you would receive a full refund under Section 87A of the Income Tax Act.

The refund requested by an individual will be credited to his or her total professional tax burden before the 4% cess is imposed.

How To Claim Tax Rebate Under Section 87A?

Here are the procedures to take if you want to claim a tax rebate under Section 87A:

  1. Determine the Gross Total Income for the fiscal year.
  2. Adjust the Gross Total Income to account for deductions from qualified assets, costs, and so forth.
  3. File an ITR stating your Gross Total Income and any allowable deductions.
  4. Section 87A allows you to receive a tax credit of up to Rs. 12,500 if your total income after deductions is less than Rs. 5 lakhs.

Some Important Points A Taxpayer Should Remember For Availing Rebate Under 87A

Here are some of the most important things to understand when obtaining a Section 87A rebate:

  1. Individual Indian citizens are the only ones who are eligible for a professional tax reimbursement under Section 87A. This discount is not available to NRIs, corporations, or firms.
  2. The 87A refund is available to senior adults aged 60 to 80; however super seniors aged 80 and higher are not eligible.
  3. SHEC and education cess are imposed on the due tax amount after adjusting for the tax refund of up to Rs. 12,500 available to qualifying taxpayers under Section 87A.
  4. According to Section 112A, the refund under Section 87A is not applicable on Long Term Capital Gains from stock or other defined assets.

Wrapping It Up

Section 87A tax refund is one of the numerous measures available to taxpayers to minimize their tax payments. Other provisions, such as 80C, 80D, 80CCD, 80GG, and others, can greatly lower the professional tax payments of salaried and self-employed professionals.

Because taxes can be complicated for someone who has recently begun earning, the aid of a professional tax expert should be sought to take full advantage of all the deductions, exemptions, and refunds available to a taxpayer.