Good news for taxpayers! The Income Tax Return (ITR) forms for the financial year 2024-25 have been updated to allow claims under Section 87A, which provides a significant tax rebate for eligible individuals. However, there is a catch. Let’s dive into what this update means for taxpayers, who can benefit from the 87A rebate and the conditions attached to it.
In this article, we’ll explain everything you need to know about the updated ITR forms, how to claim the rebate, and why this update matters for taxpayers in India.
What is the 87A Tax Rebate?
The 87A tax rebate is a provision under the Income Tax Act that allows individual taxpayers to reduce their tax liability. Here’s how it works:
- Eligibility: The rebate is available to resident individuals with a total income of up to ₹7 lakh after deductions.
- Amount of Rebate: Eligible taxpayers can claim a rebate of up to ₹12,500 on their total tax liability.
- Impact: For individuals earning up to ₹7 lakh per year, the rebate essentially brings their tax liability to zero.
The rebate is particularly beneficial for middle-class taxpayers and salaried individuals who fall under this income bracket.
What’s New in the ITR Forms?
Previously, taxpayers faced difficulties claiming the 87A rebate due to discrepancies in the ITR forms. The latest update by the Income Tax Department addresses this issue by making the following changes:
- Updated ITR-1 and ITR-2 Forms: These forms now explicitly allow taxpayers to claim the 87A rebate.
- Automated Calculations: The forms have been updated to automatically calculate the rebate based on the taxpayer’s income details.
- Error-Free Filing: The new forms minimize errors related to rebate claims, ensuring a smoother filing process.
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Who Can Use the Updated ITR Forms?
- ITR-1 (Sahaj): For individuals with income from salary, one house property, and other sources (excluding lottery winnings and racehorses) up to ₹50 lakh.
- ITR-2: For individuals and HUFs with income from sources other than business or profession.
How to Claim the 87A Rebate in the Updated ITR Forms
Here’s a step-by-step guide on how to claim the 87A rebate in the updated ITR forms:
Step 1: Choose the Right ITR Form
- For salaried individuals with income up to ₹50 lakh, use ITR-1 (Sahaj).
- If you have additional income from capital gains or multiple house properties, use ITR-2.
Step 2: Enter Your Income Details
- Fill in your total income details, including salary, house property, and other sources.
- Ensure that your total income after deductions does not exceed ₹7 lakh.
Step 3: Navigate to the Rebate Section
- In the updated forms, navigate to the section that calculates your tax liability.
- The form will automatically apply the 87A rebate if you meet the eligibility criteria.
Step 4: Verify the Rebate Amount
- Double-check the rebate amount applied to your tax liability.
- The maximum rebate allowed is ₹12,500.
Why This Update is Important for Taxpayers
The update to the ITR forms is crucial for several reasons:
- Simplified Tax Filing: The updated forms make it easier for taxpayers to claim the rebate without errors or confusion.
- Automated Calculations: By automating the rebate calculation, the forms reduce the chances of incorrect entries.
- Reduced Rejections: Earlier, many ITRs were rejected due to incorrect rebate claims. The updated forms minimize this risk.
The Catch: New vs. Old Tax Regime
While the 87A rebate is a welcome relief, it is only applicable under the new tax regime. Taxpayers need to be mindful of the following:
New Tax Regime (Applicable for 87A Rebate)
- Lower tax rates but fewer exemptions and deductions.
- Suitable for individuals who do not have significant deductions like home loans, insurance, etc.
Old Tax Regime (87A Not Applicable)
- Higher tax rates but more exemptions and deductions.
- Suitable for individuals who have various deductions such as 80C, 80D, and HRA.
Important Note: Taxpayers must choose the appropriate regime at the time of filing their ITR.
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Benefits of Claiming the 87A Rebate
- Zero Tax Liability: Individuals earning up to ₹7 lakh can effectively bring their tax liability to zero.
- Encourages Compliance: The rebate encourages more individuals to file their ITRs and comply with tax regulations.
- Middle-Class Relief: The rebate provides significant relief to middle-class taxpayers, especially salaried individuals.
Common Mistakes to Avoid When Claiming the 87A Rebate
- Choosing the Wrong Tax Regime: Ensure you select the new tax regime to claim the rebate.
- Incorrect Income Details: Double-check your income details to ensure you meet the eligibility criteria.
- Filing the Wrong ITR Form: Use ITR-1 or ITR-2 as per your income sources.
FAQs on 87A Tax Rebate and Updated ITR Forms
Q1: Who is eligible for the 87A rebate?
- Resident individuals with total income up to ₹7 lakh after deductions.
Q2: How much rebate can I claim under Section 87A?
- You can claim a rebate of up to ₹12,500.
Q3: Can I claim the 87A rebate under the old tax regime?
- No, the rebate is available only under the new tax regime.
Q4: Which ITR forms allow the 87A rebate?
- The updated ITR-1 (Sahaj) and ITR-2 forms allow taxpayers to claim the rebate.
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The recent update to ITR forms enabling the 87A tax rebate claim is a significant relief for eligible taxpayers. By simplifying the process and reducing the chances of errors, this update ensures a smoother tax filing experience. However, taxpayers must remember that the rebate is only applicable under the new tax regime.
Make sure to choose the right ITR form, fill in your income details accurately, and verify the rebate amount before filing your returns. By doing so, you can maximize your tax savings and avoid any filing-related issues.
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