In Price range 2023-24, Finance Minister Nirmala Sitharaman raised the tax-rebate restrict beneath 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 earnings is lower than or equal to Rs 7 Lakhs.
On this publish, 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 assert 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 beneath illustration.
- Revenue Tax Exemptions are allowed to be claimed from a selected supply of earnings (ex : Wage) and never from the Gross Whole Revenue. Ex : HRA
- Revenue Tax Deductions are allowed to be claimed beneath every Head and likewise from Gross Whole Revenue. The taxpayer can declare deductions in case he/she incurs specified expenditure or make specified investments beneath 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 whole 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 whole taxable earnings.
Therapy & Applicability of Rebate beneath Part 87A for AY 2024-25
Now that you just perceive what precisely tax rebate is, let’s soar to our ‘important subject’ as to how a lot tax rebate you possibly can declare beneath Part 87A for FY 2023-24.
- Firstly, observe that Part 87A Tax rebate is out there beneath each new and outdated tax regimes for Evaluation 12 months 2024-25.
- People having whole taxable earnings of as much as Rs 5 lakh are eligible for tax rebate beneath part 87A of as much as Rs 12,500, thereby making zero tax payable within the Outdated and New Tax regimes.
- People having taxable earnings of as much as Rs 7 lakh are eligible for tax rebate beneath 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 brink 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 web taxable earnings as much as Rs 5 lakhs are eligible to get pleasure from tax rebate u/s 87A beneath each new and outdated tax buildings.
- Indiiduals incomes web taxable earnings of as much as Rs 7 lakh are eligible to assert tax rebate u/s 87A however beneath new tax regime solely.
- The Tax Assessee is first required so as to add all incomes i.e. wage, home earnings, capital positive factors, enterprise or occupation earnings and earnings from different sources after which deduct the eligible tax deduction quantities u/s 80C to 80U and beneath part 24(b) (Dwelling Mortgage Curiosity) to provide you with the online taxable earnings. (When you go for new tax regime then you can’t declare earnings tax deductions u/s 80c, 80d and so on.,)
- 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 beneath Part 87A AY 2024-25
- Can NRIs declare rebate beneath part 87A? – No, this tax rebate is barely allowed for Resident Indians. Due to this fact, taxpayers qualifying as Non-Resident Indians usually are not eligible for a rebate beneath 87A.
- Can this rebate be claimed by a Agency or Firm? – This rebate is barely allowed to people. HUFs or corporations or firms can’t declare this tax rebate.
- Are Cess & different expenses (if any) must be added earlier than or after claiming this Tax Rebate? – Training 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 earnings tax rebate u/s 87A obtainable on Lengthy Time period Capital Positive aspects (LTCG)? – Rebate u/s 87A will not be obtainable on sale or switch of fairness shares i.e. on Lengthy Time period Capital Positive aspects from fairness or others as specified beneath part 112A. It’s obtainable on all different capital positive factors.
- Is rebate u/s 87A obtainable on agricultural earnings? – Sure, earnings tax rebate u/s 87A is out there on taxable earnings which incorporates agricultural incomes as effectively.
- My Taxable earnings 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’ll be able to avail of the zero-tax profit, however you continue to have to file your earnings tax return (ITR). The earnings tax exemption restrict for all residents beneath 60 years nonetheless stays at Rs 2.5 lakh. Due to this fact, if you’re incomes something above these fundamental exemption limits yearly then you’re mandatorily required to file your ITR.
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(Put up first revealed on : 04-Aug-2023)