February 1, 2019

Revised Tax Rebate under Sec.87A after Budget 2019

Effective from 1st April 2020, Tax Rebate under Sec.87A was revised in Budget 2019. Because of this there is no tax liability for those whose total taxable income is up to Rs.5,00,000.

Let us see the features of Sec.87A.

Revised Tax Rebate under Sec.87A after Budget 2019

  1. You must be a RESIDENT INDIVIDUAL
  2. Your Total Income, after Deductions, (like under Section 80C) is equal to or less than Rs.5,00,000 (Earlier it was Rs.3,50,000).
  3. The rebate is limited to Rs.12,500 (Earlier it was Rs.2,500).

It means if your total tax payable is lower than Rs.12,500, the amount will eligible for a rebate under Sec.87A. Do remember that the rebate should be applied to the total tax before adding the education cess (4%).

Let me share with you the current Income Tax Slab applicable for FY 2019-20.

Latest Income Tax Slab Rates for FY 2019-20 (AY 2020-21)

Do remember that there is no income tax slab rates changes for FY 2019-20. However, due to changes in Sec.87A, you can assume that if your taxable income is less than Rs.5,00,000, then your tax liability should be zero.

Let me explain the same with below examples.

Revised Tax Rebate under Sec.87A after Budget 2019

You notice that up to Rs.5,00,000 of your total income even through there is tax laibility, due to revised limits of Sec.87A, your tax liability turn to be zero.

However, if your total income is more than Rs.5,00,000 then you are not eligible to claim the deduction under Sec.87A. Hence, there will not be any benefit for those who are under higher tax bracket.

Refer my latest posts related to Budget 2019:-

19 Comments

  1. Should net taxable income be taken after deduction of 80c,80d,80TTA/80TTB, Standard deduction and other relief ( if eligible) for application of new changes of 87A for AY 2020-21?

    Reply
  2. Suppose my Net Income After Deduction (80C & Standard Deduction Rs.50,000/-) Rs.5,10,000/- how many Income Tax for Me for F.Y.2019-20. & this Situation can I Claim Rebate U/s87A Rs.12,500/-

    Reply
    • Dear Shadab,
      If your net income is more than Rs.5 lakh, then you are not eligible to claim deduction under Sec.87A.

      Reply
  3. Is it effective 1st April 2020 or 1st April 2019?

    Reply
      • thank you for the reply! can you please help me understand how does this work? Shouldn’t it be FY2019-20? When will the union budget of new govt get effective?

        Reply
        • Dear Shishir,
          In my view, they are mentioning the AY but not FY. Hence, it will be effective from 1st April 2019 itself.

          Reply
          • Thanks Basu! Can I request you to mention this in the blog? As it begins with eff. 1.4.2020, it caught the attention.

            Reply
            • Dear Shishir,
              It is not clear from the Finance Bill 2019 whether it is AY or FY. Hence, I just mentioned of what it is in Finance Bill. Let us wait for clarity.

              Reply
              • Ok Thanks Basu !

                Reply
  4. Hi Basavraj,

    Your example is correct but you should use the word ‘total taxable income’. Not ‘total income’. Income after all the investments is ‘taxable’ income. If that exceeds 5 lakh rs, then you are taxed. Not if your gross income is 7 lakh.

    Regards,
    KP

    Reply
    • Dear Kishan,
      In IT world, TOTAL INCOME means by default TOTAL TAXABLE INCOME.

      Reply
  5. If after all deductions(u/s 80c…..), Taxable income is 4,99,999/-, one need not pay any tax

    But,
    If taxable increases by Rs 6, that is 5,00,005, (s)he has to pay tax of 12,500(+4%cess)

    Who are near borderline, might force their employers to reduce their salary by Rs1.00 per month, in order to save 1000 per month

    Reply
    • Let me make this clear. If an individuals income is say 5,00,005. He can invest some money in 80C. (Wont require too much. Even 10,000rs investment will do). This will bring his income below 5,00,000 and he wont have to pay any tax.

      Reply
  6. If my salary 10lakh and no tax upto 5lakh hence my taxable income is remaining 5lakh and i can use 87a right? Extra bdnefit

    Reply
    • Dear Ranjan,
      Sec.87A is applicable to those whose TOTAL income is less than or equal to Rs.5,00,000. If your total income is more than Rs.5 lakh, then you are not eligible to claim the deduction under Sec.87A.

      Reply
    • If after showing all the investment, you net income comes below 5 lakh then you are eligible for Tax rebate. which means you wont have to pay tax.

      Reply

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