Ever wondered if you’re eligible for a tax rebate in India? The Income Tax Act offers a helping hand to many taxpayers through Section 87A. But what exactly is this rebate, and why can some filers miss out on this benefit?
Understanding Section 87A
Section 87A provides a tax rebate to resident individual taxpayers. It essentially reduces your tax liability or the amount of tax you owe to the government. This rebate is available under two tax regimes in India:
Old Tax Regime: If you choose the old regime, you can claim the rebate if your taxable income is up to Rs. 5 lakhs. The maximum rebate amount here is Rs. 12,500.
New Tax Regime: The new regime offers a higher threshold. You can claim the rebate if your taxable income is up to Rs. 7 lakhs, with a maximum rebate of Rs. 25,000.
Who Can’t Claim the Rebate?
Even if your income falls under the specified limits, there are situations where you might not be eligible for the rebate:
Choosing the Incorrect Regime: You need to select the tax regime (old or new) while filing your Income Tax Return (ITR). If you mistakenly choose the wrong regime, you won’t be able to claim the rebate under Section 87A applicable to your chosen regime.
Short-Term Capital Gains: As of July 5, 2024, short-term capital gains from equity shares and equity-oriented mutual funds are no longer eligible for the rebate under the new tax regime. This means even if your total income excluding these gains falls under Rs. 7 lakhs, you might not get the full rebate if you have such gains.
Maximizing Your Rebate
To ensure you claim the maximum rebate benefit:
Carefully Choose Your Tax Regime: Analyze your income sources and deductions to determine which regime offers a lower tax liability.
Report Income Accurately: Ensure all your income sources, including capital gains, are accurately reported in your ITR.
Stay Updated on Changes: Tax rules are subject to change. Keep yourself updated on any modifications to Section 87A or the tax regime system.
By understanding Section 87A and the eligibility criteria, you can optimize your tax filing and potentially claim a rebate that reduces your tax burden. Remember, consulting a tax advisor for personalized guidance is always recommended, especially if your tax situation is complex.