Bailabel Type : bailable

Description

Section 87A of the Income Tax Act, 1961 provides a rebate on income tax to eligible individuals. This rebate is intended to provide financial relief to taxpayers with lower taxable income, helping them reduce their tax liability. It is a direct reduction from the tax payable, which helps taxpayers with a certain level of income to ease their overall tax burden.

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Key Features of Section 87A:

1. Eligibility:

• Individual taxpayers (i.e., residents of India) who are below the age of 60 years are eligible for this rebate.
• Hindu Undivided Families (HUFs), companies, and firms are not eligible for this rebate.
• The rebate is available only on the income tax payable, not on the total income.

2. Amount of Rebate:

• The rebate available under Section 87A is ?12,500 for individuals whose total taxable income is less than or equal to ?5,00,000.
• The rebate is given on the tax payable and not directly on the total income.
• If the tax payable is less than ?12,500, the taxpayer will be entitled to a rebate equal to the tax payable.
  • For example, if the tax payable is ?10,000, the rebate will be ?10,000.
  • If the tax payable is ?15,000, the rebate will be ?12,500, as this is the maximum limit.

3. Rebate Calculation:

• The rebate under Section 87A is provided after the application of other deductions, such as those under Sections 80C, 80D, etc.
• The rebate is applied after calculating the total tax payable, so it reduces the final tax liability for eligible taxpayers.

For example:

• Suppose an individual's total taxable income is ?4,50,000.
  • The calculated tax before applying the rebate is ?10,000 (based on the income slab).
  • Since the total tax payable is less than ?12,500, the full rebate of ?10,000 can be applied.
• If the taxable income is ?5,50,000, the individual would be in a higher tax bracket (with tax liability of ?12,500 or more), and the maximum rebate of ?12,500 will apply.

4. Income Limit:

• Section 87A applies only to individuals with a taxable income of ?5,00,000 or less in a financial year.
• Taxpayers with an income exceeding ?5,00,000 do not qualify for this rebate.

5. Applicability of Rebate:

• The rebate under Section 87A is applicable only if the total tax payable (after calculating the tax as per applicable income slabs and before applying the rebate) is not more than ?12,500.
• If the total tax payable exceeds ?12,500, the rebate will be limited to ?12,500.

Punishment

Section 87A is essentially a rebate and does not have any direct punishments for its non-compliance. However, failure to accurately report taxable income or misuse of this provision can lead to penalties under the Income Tax Act, including:

1. Penalty for Concealment of Income (Section 271(1)(c)):

   • If an individual misrepresents their income or falsely claims the rebate under Section 87A, penalties may be imposed under Section 271(1)(c) for concealing income or furnishing inaccurate information.
   • The penalty can be 100% to 300% of the tax evaded.

2. Interest for Underpaid Taxes (Section 234A, 234B, 234C):

   • If the tax return is filed incorrectly or a person under-reports their income, interest may be charged under Section 234A (for delay in filing), Section 234B (for underpayment of advance tax), and Section 234C (for shortfall in advance tax installments).

3. Prosecution for Willful Evasion (Section 276C):

   • If an individual willfully evades tax by falsely claiming deductions or rebates, prosecution may be initiated under Section 276C.
   • The person could face imprisonment for 3 months to 7 years and also be subjected to a fine.