Budget 2013: Are you eligible for Rs 2000 Tax Rebate under Sec 87A?

The highlight of budget 2013 for common man was the Tax Rebate of Rs 2,000 for people with income of less than Rs 5 lakhs. This has been made possible by inserting a new section 87A in the Income Tax Act of 1961. I posted the Income Tax calculator for FY 2013-14 and received a lot of queries regarding the Rs. 2,000 tax rebate.

For changes in Section 87A please click here.

Who is eligible for Tax Rebate?

Only individuals with income of less than Rs 5 lakh are eligible for Rs. 2,000 tax Rebate. HUFs are not eligible for this rebate.

Which income is considered for Tax Rebate?

The Rs 5 lakh income is net of your gross income and your tax saving investment under Section VI.

What is included under Section VI?

The following tax exemptions are considered under section VI.

  • 80 C – Investment in Life Insurance, ELSS, Tax Saving Fixed Deposit, EPF/ VPF Contribution, PPF, NSC, Housing Loan Principal Repayment, Tuition Fee for your children, etc.
  • 80CCC – Deduction in respect of Payment of premium for annuity plan of LIC or any other insurer
  • 80CCD – Contribution made by Central government Employees in his pension account to the extent of 10% of his salary.

The maximum total tax exemption from all the above three sections 80C, 80CCC and 80CCD shall not exceed Rs 1 lakh.

  • 80D – Medical Insurance Premium for self and family members. The maximum exemption is Rs 15,000 (Rs. 20,000 if senior citizen). There is additional Rs 15,000 exemption for medical insurance premium of parents (father/ mother or both). This exemption is Rs 20,000 in case parents are senior citizens.
  • 80DD – Deduction in respect of maintenance including medical treatment of dependent who is a person with disability. Maximum deduction Rs. 100,000/- in case of severe disability (more than 80%) and Rs. 50,000/- in other cases.
  • 80DDB – Deduction up to Rs. 40,000 (Rs. 60,000 for Senior Citizens) for expenditure actually incurred on self or dependent relative for medical treatment of specified disease or ailment.
  • 80E – Deduction of interest of Education Loan
  • 80G – Deduction for donation to certain charitable funds, charitable institutions, etc.
  • 80GGA – Deduction in respect of certain donations for scientific research or rural development
  • 80GGC – Deduction in respect of contributions given by any person to political parties
  • 80GG – For paying rent in case you do not receive HRA.
  • 80U – Deduction of Rs. 50,000 (Rs 1,00,000 in case of severe disability) to an individual who suffers from physical disability.

An Example:

If you have a gross income of Rs 6.5 Lakh and invest 1 Lakh in 80C exemption. Also you pay Rs. 50,000 for education Loan interest exemption under sec 80E.

Your taxable income comes to Rs 5 lakhs. So you would be eligible for Rs. 2,000 Tax Rebate under Sec 87A.

In case you have any queries please do let us know through comments.

23 thoughts on “Budget 2013: Are you eligible for Rs 2000 Tax Rebate under Sec 87A?”

  1. Pls clarify rebate u/s 87A should only be claimed while filing the return or employer should allow the deduction while calculating the tax liability of an employee

    1. Employer too should use Section 87A to compute tax paid by employee. The TDS from salary should be deducted on this basis!

    1. As explained in the example if your taxable income after all deductions is less than Rs 5 lakh you would be eligible for rebate u/s 87A

  2. Gopal Singh Negi

    Hi Amit thanks for your wonderful guide ‘how to save tax 2015’. Kindly clarify my doubt on NSC. You have written under good points- The interest accrued for NSC qualifies for sec 80C deduction in subsequent years.and under bad points- The interest earned is taxable, These contra views confusing me. Kindly elaborate.
    Thanks and regards.
    GS Negi

    1. If you earn Rs 100 as interest on your NSC deposit, this would be added to your income and taxed accordingly. However this Rs 100 would also qualify for deduction u/s 80C. Both are different things and are not contradictory.

      let me know in case you need further clarification.

  3. Kiritbhai j astik

    Respected sir
    I am the Bank employee. I have Reimbursed medical bill for knee replacement of my wife .Amt is Rs 198379/-
    please give suggestion for not to pay I tax on above medical bill
    Thanking you

  4. My gross total income for AY 2014-15 is Rs 6,02,676/-. After deduction under chapter VI A, the total/taxable income comes to Rs 4,92,680/-. Am i eligible to get tax rebate of Rs 2000/-?

  5. The Rebate Rs. 2000/- U/s.87(A) will be deducted after arriving the 3% educational chess or in before arriving the Tax Amount?

  6. I want to give donate BJP or Congress party so can i save my tax
    My net income is 254000 INR
    I want to donate 25000 INR

    I you suggest invest or block 25000 INR so i block my rupees only for 2 month.

    Also my friend have Q. can he show both house rent U/S 10 and house loan U/C VI A if he stay in different location but he has own house and his running home loan.

    Please reply / Thanks in advance

  7. Dear Sir,
    Please clarify my doubt on rebate calculation.

    As per the above example is it –
    # Tax to be paid = tax on Rs. 3 lakh – Rs. 2000 = Rs. 28,000
    # Tax to be paid = tax on (Rs. 3 lakh – Rs 2000) i.e. tax on Rs. 2,98,000 = Rs. 29,800 ?
    (In both case considering no tax up to Rs. 2 lakh)

    I believe second case is correct.
    Please let me know the way rebate is to be considered for final tax to be paid.

  8. Amit,

    How do we need to get this Tax rebate? Do we need to declare in our IT form. or this needs to done at the time of IT returns? Please let me know.

    Thanks in advance

    1. This would be automatically calculated when you file your returns. This would also be reflected in your Form 16

  9. Hi Amit,

    I’m a working as an IT engineer and my current package is 6.3 LAC per year. Under 80C I’ve investments worth of 1 lac and under 80D 12000. Am I eligible for this tax rebate?

    Please let me know if any details need to be provide for more clarification.

    Thanks in advance.
    Kishore B

  10. HRA exemption is not a part of your salary and is not included in Gross Total Income. You consider that it is not your income and does not in any way affect rebate u/s 87A.

  11. What about HRA exemption under sec 10(13A) of the IT Act. Is this also part of Chapter VI for the purpose of arrivng Net Taxable income

    1. HRA exemption is not part of Chapter VI, but it should be included in calculating Tax rebate. But I am not sure of this one and would request knowledgeable people to comment on this issue.

Leave a Comment

Your email address will not be published. Required fields are marked *