There is a lot of confusion in the manner in which the rebate u/s 87 A of Income Tax Act is calculated.
Applicable From Rebate u/s is inserted w.e.f. 01-04-2013 i.e.,the rebate provision is Applicable from Financial Year 2013-14 (Asst. Year 2014-15).
Applicable to (Type of Assessee):
1. Rebate is applicable for Resident Individuals i.e., Male and Female including Senior Citizens (less than 80 years).
2. Which means the rebate is not applicable for Non-Resident Individuals Net Income Limit Less Than 5,00,000
1. The Rebate is applicable for above mentioned individuals whose Net Income i.e., Taxable Income does not exceed 5,00,000/-.
2. Which means only if your net taxable income is less than or equal to 5,00,000, you are eligible for rebate.
3. Even if your Gross Total Income is more than 5,00,000 but after considering deduction, the Net Recent Articles Income falls below 5,00,000 you are still eligible for rebate.
e.g. Your Gross Total Income = 5,7 0,000
Deductions U/s 80C- 80U (LIC, PF, etc., ) = 90,000
Net Taxable Income = 4,80,000
Since your Net Tax able Income doesn’t exceed Rs. 5,00,000 you are also eligible for Rebate, but since their basic exemption is already 5,00,000 and Rebate is applicable only if the taxable income is less than 5,00,000, question of Rebate does not arise.
* Rebate Calculation:The amount of rebate is 100% of income tax or Rs. 2,000 whichever is less.
* Rebate should be deducted before calculating education cess.