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How to calucate tax rebate u/s 87a?

Shivani (Learner) (1881 Points)

29 October 2013

Hi Members

If Taxable Income of X is as below, how to calculate rebate under section 87A.

Salary 300000

Long Term Capital Gain 100000

Lottery Winnings 100000

Total Taxable Income 500000 (assuming deductions under Chapter VIA to be Nil)

Thanks

Shivani

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37 Replies

Nikhil Kaushik (Fellow CA) (85569 Points)
Replied 29 October 2013

Assuming that capital gains are taxable at 20% and lotteries at 30%, your tax liability shall be Rs 50,000 less Rs 2000= 48000

See the rebate under 87A is simple. it is minimum of Rs 2,000 of 100% of the tax liability.

Since your tax liability is higher than Rs 2,000, the rebate is limited to Rs 2,000 only. Had your tax liability been lesser, lets say, Rs 1,500, then rebate shall be Rs 1,500 only.

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Mihir (Wealth Manager) (5293 Points)
Replied 30 October 2013

Salary taxed at 10%

LTCG taxed at 20%

Lottery taxed at 30%

Add Cess at 3%

Tax liability is reduced by 2,000/- before deductions.

Shivani (Learner) (1881 Points)
Replied 30 October 2013

Dear Members

I feel the calculations should be like below:

Tax on Salary Income 10000

Tax on LTCG 20000

Tax on Lottery 30000

Total Tax 60000

Add: Cesses 3% 1800

Total Tax

Less Rebate under 87A 2000

Tax Payable 59800

Nikhil Kaushik (Fellow CA) (85569 Points)
Replied 30 October 2013

Dear Shivani,

Yes your tax computation is correct. I just gave you the example of how to calculate rebate under 87A.

Shivani (Learner) (1881 Points)
Replied 30 October 2013

Dear Nikhil

What if a person has no income except lottery winnings of Rs. 5,000 only during the PY 13-14?

I feel

Tax 1500

Less: Rebate 1500

Tax Payable Nil

Am I right?

But if I am right will the person making lottery payment deduct TDS in this case?

If yes, then will X claim refund of TDS deducted in his ITR?

Please guide

Shivani

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Nikhil Kaushik (Fellow CA) (85569 Points)
Replied 30 October 2013

Ideally yes. the way section is constructed, it gives rebate on the tax. so the refund of TDS should be allowed.

Ganeshbabu K (Audit and Tax Advisory) (48564 Points)
Replied 02 November 2013

You are eligible to take credit under section 87A as your total income after chapter VIA deductions not exceeded 5 lakhs

you can get tax rebate up to Rs.2000

.suppose your taxliability is 25000 you can pay 23000 after taking this tax rebate.

Note: Sec.87A will be applicable from A>Y.2014-15 onwards

Ganeshbabu K (Audit and Tax Advisory) (48564 Points)
Replied 02 November 2013

this rebate should not be more than tax payable

suppose you tax liability is 1500 your rebate u/s 87A limited to 1500 and nil tax payable

for more clarifications in this regard..refer

/forum/new-income-tax-rebate-rs-2000-sec-87a-241553.asp#.UUlszRwZ115

Lalit Bhagat (sr.accounts executive) (21 Points)
Replied 24 December 2013

Dear Si/Madam

Please let me know which financial year is the Secton 87A is applicable from? Can we take the advanntage of this section for F.Y. 2013-14.

with regards

Lalit Bhagat

Ganeshbabu K (Audit and Tax Advisory) (48564 Points)
Replied 24 December 2013

Originally posted by : Lalit Bhagat
	Dear Si/Madam Please let me know which financial year is the Secton 87A is applicable from? Can we take the advanntage of this section for F.Y. 2013-14. with regards Lalit Bhagat

Yes it is applicable from A.Y.2014-15 onwards..

for more clarifications about this section refer

/forum/new-income-tax-rebate-rs-2000-sec-87a-241553.asp#.Urk6kfQW11a

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Ankush Garg (Service) (27 Points)
Replied 25 December 2013

Rebate must be allowed before adding Education Cess. Shivani, In your example tax calculation will be :

Total Tax 60000

Rebate under 87A 2000

Net Tax 58000

Add: Cesses 3% 1740

Tax Payable 59740

1 Like

Mallesh S (Executive - Finance) (31 Points)
Replied 02 January 2014

Dear Members,

If an employee resigned from service & his taxable income is below 5 lakhs, is he eligible for rebate Under section 87A,

Example: If an emplyee Taxable income for the Year 2013-14 is Rs.450000/- & his Taxable income for the period upto his relieving from service is Rs.300000/-, in this case he is eligible for rebate.

Thanks & Regards

Mallesh