Relief under Section 87A of the Income Tax Act

For taxpayers in India, the burden of income tax can be alleviated through various provisions introduced by the government. One such provision is Relief under Section 87A, which offers a significant benefit to individual taxpayers with lower incomes.

What is Relief under Section 87A?
Section 87A is a provision under the Income Tax Act that grants relief to individual taxpayers by reducing their tax liability. It was introduced with the objective of providing tax benefits to taxpayers with low and moderate incomes. Relief 87A offers a rebate on the tax payable, resulting in either a reduced tax liability or, in some cases, no tax payable at all.

Eligibility Criteria for Relief 87A
To be eligible for Relief under Section 87A, the taxpayer must meet the following conditions:
- The taxpayer should be an individual, resident in India.
- The total taxable income after all deductions (under Sections 80C to 80U) does not exceed the maximum threshold specified for the relevant financial year.

Maximum Threshold for AY 2024-25
For the Assessment Year (AY) 2024-25, the maximum threshold for claiming Relief 87A is Rs. 5,00,000. This means if the total taxable income of an individual does not exceed Rs. 5,00,000, they are eligible to claim the entire amount of tax relief available under Section 87A.

Quantum of Relief
The quantum of relief available under Section 87A is calculated as follows:
- If the total taxable income does not exceed the maximum threshold (Rs. 5,00,000 for AY 2024-25), the taxpayer is eligible for a tax rebate equal to 100% of the income tax calculated.
- The maximum tax rebate allowed is capped at Rs. 12,500 for AY 2024-25.

Example of Relief 87A Calculation
Let's understand how Relief 87A works with an example:
Suppose Mr. A has a total taxable income of Rs. 4,50,000 for the AY 2024-25. As his income does not exceed the maximum threshold of Rs. 5,00,000, he is eligible for the entire tax relief.

Calculation:
Income tax on Rs. 4,50,000 (at applicable tax rates) = Rs. 10,000
Tax Relief under Section 87A = Minimum of (Rs. 10,000, Rs. 12,500)

In this case, as the calculated income tax on Rs. 4,50,000 would be less than Rs. 12,500, Mr. A will get a full tax rebate of Rs. 10,000 (the actual tax calculated).

Applicability and Documentation

Taxpayers who meet the eligibility criteria can claim Relief 87A while filing their income tax returns. There is no need for additional documentation to avail the relief; it will be automatically computed based on the taxpayer's income details provided in the ITR.

Relief under Section 87A is a valuable provision designed to provide financial assistance to taxpayers with lower incomes. By offering a tax rebate on the calculated income tax, the government aims to ease the tax burden for individuals with limited financial resources. It is essential for eligible taxpayers to take advantage of this relief while filing their income tax returns to optimize their tax planning and ensure they benefit from this beneficial provision. As tax laws are subject to change, it is advisable to stay updated with the latest rules and consult a qualified tax professional for accurate advice on availing Relief 87A.