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Income Tax rebate of Rs.2000.00

Date: 12 Aug 2013   Posted By: Saravanan V K     Group: Finance and Investments    Category: Tax Planning   

Would the Income tax rebate of Rs.2000/- for those whose income is less than or equal to Rs.500000/- be applicable for financial year 2013-14? Also give me an example how this will be calculated. Say for example my total CTC is Rs.485000/-, then how will they give rebate?

Wondering about the tax rebate if income is less than or equal to 5 lakh? Not sure about how the calculation would be done for the coming financial years? Ask our tax planning experts in ISC for correct details.

Author: [Anonymous]    12 Aug 2013      Member Level: Gold     Points : 2    Voting Score: 0

There is a relief for Tax Payers in the bracket of 2 lakhs to 5 lakhs. A tax credit of Rs. 2000 to every person with total taxable income up to Rs.5 lakhs. In simple sense, one can say that those with a tax liability of up to Rs 2,000 will not have to pay any tax. You will have to Pay less if you fall in the 10 % tax bracket. As per government data, 1.8 crores people fall under this tax bracket and all of them will have to pay a less amount tax of Rs. 2000/- from the total tax amount.

Author: Manoj Chaurasia    12 Aug 2013      Member Level: Gold     Points : 6  (Rs 5)    Voting Score: 0

Tax rebate of Rs.2000 u/s 87A, is applicable for F.Y. 2013-14 only, so in case your income as mentioned falls below Rs.5 lakh.

Practical example applicable to you will be as follows:

a) Salary Income: Rs. 485000
b) Deduction u/s 80C: Rs.100000
c) (a)-(b)Net Taxable income: Rs. 385000
d) Tax on Rs.385000 will be Rs.19055*

a) Taxable income = Rs. 385000
b) Less: Basic exemption limit: 200000
c) Net taxable salary = Rs. 185000

Tax @ 10% = 10%(185000) = Rs.18500
Education cess @ 3% on 18500 = Rs.555
Total tax = 18500+555 = Rs.19055

Now the rebate of Rs.2000 u/s 87A will be applied here and the balance tax will be deposited i.e.
Rs.19055 - Rs.2000 = Rs. 17055

Actual tax liability after providing for the rebate will be Rs.17055.

Since you are a salaried employee hence the employer will deduct the actual applicable after providing for the benefit of above section. Although you can verify the same with accounts department of your company.

For more examples you can visit the site and search for section 87A. Few more examples with detailed explanation of the section is provided on the site.

Hope your doubts are clear.

Author: Saravanan V K    12 Aug 2013      Member Level: Gold     Points : 1    Voting Score: 0

Hi Manoj,

I have got 100% clarity on the rebate of Rs.2000/-. I have also calculated in excel sheet as per your workings got the answer. Thanks for your help.

Author: Hima    12 Aug 2013      Member Level: Silver     Points : 0    Voting Score: 0

Here tax explained clearly..So I understand clearly this Rs.2000/- tax rebate u/s 87A will be deducted as exemption.

Author: Manoj Chaurasia    13 Aug 2013      Member Level: Gold     Points : 1    Voting Score: 0

You are most welcome Mr. Saravanan. In case of any doubt regarding Income Tax, you can always ask your questions, I will help you out.

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