As per the Budget 2023, under Sec.87A, how is income up to seven lakhs tax-free from 1st April 2023? This is the biggest relief for those who are looking for some tax relief. Hence, let us discuss on this aspect in detail.
All about Sec.87A of the Income Tax Act
You have to first understand Sec.87A to know how is the income up to seven lakhs tax-free.
The conditions to avail the tax benefit under Sec.87A are as below.
# You must be a RESIDENT INDIVIDUAL (he may be ordinarily resident or not ordinarily president).
# Your Total Income, after Deductions, (like under Section 80C to 80U) is equal to or less than Rs.5,00,000 (for the old tax regime). But for the new tax regime, it is now enhanced to Rs.7,00,000.
If the above two conditions are satisfied, then the resident individual can claim a rebate under Sec.87A as below.
- 100% of income tax or Rs.12,500, whichever is less (for old tax regime)
- 100% of income tax or Rs.25,000, whichever is less (for new tax regime)
In a Budget 2023 speech, it is clearly mentioned as below.
“The first one concern rebate. Currently, those with income up to Rs.5 lakh do not pay any income tax in both old and new tax regimes. I propose to increase the rebate limit to Rs.7 lakh in the new tax regime. Thus, persons in the new tax regime, with income up to Rs.7 lakh will not have to pay any tax.“
It is clearly mentioned that the Rs.7 lakh enhancement is ONLY FOR NEW TAX REGIME. However, there is no alternation for this section if you are under old tax regime.
Hence, let me share the example of the old tax regime first.
Now, let us take an example of the new tax regime and try to understand how is income up to seven lakhs tax-free.
I hope it is now clear to all of you in understanding under Sec.87A, how is income up to seven lakhs tax-free. You can refer the latest posts on Budget 2023 –
- Revised Latest Income Tax Slab Rates FY 2023-24
- Budget 2023 – 12 Key highlights impacting personal finance