Maximize Your Ta Savings with Section 87A Tax Rebate| If your taxable income is below Rs 5 lakh in the financial year 2022-23 (the assessment year 2023-24), you may be eligible for a tax rebate Under Section 87A of the Income Tax Act, 1961. This rebate can provide you with a maximum benefit of Rs 12,500, regardless of whether you follow the old or new tax regime. However, there are certain types of incomes that are not eligible for this tax rebate.
Maximize Your Savings with Section 87A Tax Rebate | Therefore, Incomes not eligible for tax rebates under Section 87A include long-term capital gains (LTCG) from equity shares, equity mutual funds, and certain specified incomes. If your total income includes any LTCG under Section 112A from the sale of listed equity shares or equity mutual funds, you cannot claim the rebate under Section 87A for the tax payable on such LTCG. LTCG from equity shares and equity mutual funds is taxable at 10% if it exceeds Rs 1 lakh in a financial year, and the rebate does not apply to this tax.
Additionally, certain special incomes are also excluded from the tax rebate. Incomes from gambling, virtual digital assets (VDA), online gaming, lotteries, game shows, or betting are not eligible for the tax rebate under Section 87A. In other words, These incomes will be taxed at a flat rate of 30%, along with cess and surcharge (if applicable).
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To claim the tax rebate under Section 87A, you must be an Indian resident individual, and your total income after claiming deductions (such as under sections 80C and 80D) should not exceed Rs 5 lakh in FY 2022-23.
In addition, It’s essential to file an income tax return (ITR) to claim the tax rebate under Section 87A. After that, The rebate is not automatically applied, and ITR filing is mandatory if your total taxable income exceeds the basic exemption limit in a financial year.
Similarly, The basic exemption limit for FY 2022-23 (AY 2023-24) depends on your age and the tax regime you choose. Above all, For individuals below 60 years, the basic exemption limit is Rs 2.5 lakh in the old tax regime, and in the new tax regime, it’s Rs 3 lakh. The new tax regime allows tax rebates under Section 87A for taxable incomes up to Rs 7 lakh.
It’s important to note that the tax rules may change from the current financial year FY 2023-24, and the basic exemption limit and tax rebate under Section 87A may be revised accordingly.