FAQ's on Section 87-A for income tax
Hemlata Khandelwal / 2021-04-19 04:04:18
In Budget 2021 also, the central government did not announce anything about income tax exemption. The basic exemption limit in income tax has been kept up to Rs 2.50 lakh only. The government does not want people to come out of the tax net and they do not have to file income tax returns. However, even after this, the government has given concession in tax up to a fixed income limit. Currently, people earning up to Rs 5 lakh a year get a concession in income tax. This rebate is found under section 87A.
Section 87A was first introduced in the Finance Act 2003. Since then, it has undergone many changes from time to time. Under the current rule, if a person's annual income is up to Rs 5 lakh and tax liability is incurred on them, then they get a tax rebate of Rs 12,500.
It is also worth noting that if your income is more than Rs 5 lakh, then you will not get this concession under section 87A. Not everyone gets this concession.
Who does not get tax exemption under 87A?
Tax exemption of more than 2.5 lakh rupees per year is available to all individuals and undivided Hindu families. But under section 87A the concession is available only to individuals. It does not include Hindu undivided families and non-migrant persons.
On what income does this concession get?
There is always confusion among people about the concession, on which their income will be benefited. Explain that this will be the income on which your tax liability is made. LIC, EPF, PPF, ELSS, Tuition Fees, Home Loan Repayment under Section 80C of Income Tax, NPS under Section 80CCD, Health Insurance under Section 80D, Donations under Section 80G and Meetings with Bank under Section 80TTA and 80TTB This concession is available only after-tax exemption on interest, etc.
What type of tax liability does this concession get?
It is not that you will get this tax concession of Rs 12,500 under Section 87A on any tax liability. This concession will be available to you on the same tax liability, which is available on the tax slab and long-term capital gains under section 112. Also, short-term capital gains from listed equities and mutual funds under section 111A are available on earnings.
How does this tax concession work?
Generally, people feel that if their income does not exceed Rs 5 lakh, then they will not have to pay tax. This is also because the tax rate between 5 lakh rupees to 5 lakh rupees is 5 percent. A tax of Rs 12,500 is made on Rs 2.50 lakh.
However, if your income is from any such source, which has to pay more than 5 percent tax, then you will have to pay tax even after income less than Rs 5 lakh.