In Price range 2023-24, Finance Minister Nirmala Sitharaman raised the tax-rebate restrict underneath the brand new tax regime to Rs 7 lakh, from the sooner restrict of Rs 5 lakh.
This tax rebate has been made relevant if a person’s (Resident People together with Senior Residents) taxable revenue is lower than or equal to Rs 7 Lakhs.
On this submit, allow us to perceive : What’s Tax Rebate? What’s the distinction between Revenue Tax Rebate Vs Tax Exemption Vs Tax Deduction? What’s the tax therapy and applicability of Part 87A Tax Rebate FY 2023-24 (AY 2024-25)? What’s the eligibility standards to say Tax rebate of as much as Rs 25,000 in AY 2024-25?
What’s Tax Rebate?
Tax rebate is a refund on taxes when the legal responsibility on tax is lower than the tax paid or liable to pay, by the person is known as Revenue Tax Rebate.
Revenue Tax Rebate Vs Tax Exemption Vs Tax Deduction
Allow us to perceive the distinction between a tax rebate and tax exemption/deduction with the assistance of the under illustration.
- Revenue Tax Exemptions are allowed to be claimed from a selected supply of revenue (ex : Wage) and never from the Gross Complete Revenue. Ex : HRA
- Revenue Tax Deductions are allowed to be claimed underneath every Head and likewise from Gross Complete Revenue. The taxpayer can declare deductions in case he/she incurs specified expenditure or make specified investments underneath varied sections of the IT Act. Examples: Investments u/s 80c (or) Well being Insurance coverage premium u/s 80D.
- Whereas Revenue Tax Rebate is allowed to be claimed from the entire tax payable (earlier than availing the essential exemption restrict). So, the tax exemptions and deductions are allowed to be claimed from the Revenue and Rebate is allowed from the tax payable. Sec 87A rebate threshold restrict is predicated on the entire taxable revenue.
Therapy & Applicability of Rebate underneath Part 87A for AY 2024-25
Now that you just perceive what precisely tax rebate is, let’s soar to our ‘essential subject’ as to how a lot tax rebate you possibly can declare underneath Part 87A for FY 2023-24.
- Firstly, notice that Part 87A Tax rebate is out there underneath each new and outdated tax regimes for Evaluation 12 months 2024-25.
- People having whole taxable revenue of as much as Rs 5 lakh are eligible for tax rebate underneath part 87A of as much as Rs 12,500, thereby making zero tax payable within the Outdated and New Tax regimes.
- People having taxable revenue of as much as Rs 7 lakh are eligible for tax rebate underneath part 87A of as much as Rs 25,000, thereby making zero tax payable within the New Tax regime solely.
Eligibility & Rebate U/S 87A Restrict for FY 2023-24
The edge restrict us/ 87A is Rs 12,500 or Rs 25,000 relying on the kind of tax regime you go for.
- Solely Particular person Assesses incomes internet taxable revenue as much as Rs 5 lakhs are eligible to get pleasure from tax rebate u/s 87A underneath each new and outdated tax buildings.
- Indiiduals incomes internet taxable revenue of as much as Rs 7 lakh are eligible to say tax rebate u/s 87A however underneath new tax regime solely.
- The Tax Assessee is first required so as to add all incomes i.e. wage, home revenue, capital features, enterprise or occupation revenue and revenue from different sources after which deduct the eligible tax deduction quantities u/s 80C to 80U and underneath part 24(b) (House Mortgage Curiosity) to provide you with the web taxable revenue. (When you go for new tax regime then you cannot declare revenue tax deductions u/s 80c, 80d and many others.,)
- The quantity of tax rebate u/s 87A is restricted to the utmost of Rs 12,500 or Rs 25,000. In case the computed tax payable is lower than Rs 12,500, say Rs 10,000 the tax rebate shall be restricted to that decrease quantity i.e., Rs 10,000 solely.
FAQs on Rebate underneath Part 87A AY 2024-25
- Can NRIs declare rebate underneath part 87A? – No, this tax rebate is just allowed for Resident Indians. Subsequently, taxpayers qualifying as Non-Resident Indians will not be eligible for a rebate underneath 87A.
- Can this rebate be claimed by a Agency or Firm? – This rebate is just allowed to people. HUFs or companies or corporations can’t declare this tax rebate.
- Are Cess & different prices (if any) must be added earlier than or after claiming this Tax Rebate? – Schooling Cess and SHEC are levied on the Tax payable after permitting for tax rebate of as much as Rs 12,500 or Rs 25,000.
- Is revenue tax rebate u/s 87A accessible on Lengthy Time period Capital Positive aspects (LTCG)? – Rebate u/s 87A will not be accessible on sale or switch of fairness shares i.e. on Lengthy Time period Capital Positive aspects from fairness or others as specified underneath part 112A. It’s accessible on all different capital features.
- Is rebate u/s 87A accessible on agricultural revenue? – Sure, revenue tax rebate u/s 87A is out there on taxable revenue which incorporates agricultural incomes as properly.
- My Taxable revenue is lower than Rs 5 Lakh, so my tax legal responsibility could be NIL. Do I nonetheless have to file my Revenue Tax Return for FY 2023-24 / AY 2024-25? – You may avail of the zero-tax profit, however you continue to have to file your revenue tax return (ITR). The revenue tax exemption restrict for all residents under 60 years nonetheless stays at Rs 2.5 lakh. Subsequently, in case you are incomes something above these primary exemption limits yearly then you might be mandatorily required to file your ITR.
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(Publish first printed on : 04-Aug-2023)