Maximizing Section 87A Rebate and Filing Your Tax Returns Without Scrutiny Issues
- Rashmita Choudhary
- Jul 10
- 9 min read
Taxpayers in India have a significant advantage when filing their Income Tax Returns (ITR) under Section 87A of the Income Tax Act. This section offers a rebate on income tax liability, which can significantly reduce the amount of tax you owe. Section 87A is designed to benefit individuals earning lower incomes, and it is a valuable tool for tax planning and savings. The rebate is applicable only to taxpayers who meet certain eligibility criteria and is available under both the old and new tax regimes. Understanding how to use Section 87A effectively can help taxpayers maximize their tax savings and ensure compliance with the latest tax laws.
Table of Contents
What is Section 87A Rebate and How Does It Work?
Section 87A provides a rebate of up to ₹12,500 for individual taxpayers whose annual income is less than ₹5 lakh. This rebate directly reduces the tax payable by the individual, making it an attractive benefit for those within this income range. The rebate is applied after calculating the total tax liability, meaning that the final tax payable is reduced by the amount eligible for the rebate.
For example, if a taxpayer has a taxable income of ₹4.8 lakh and their tax liability is ₹12,500, they would be eligible for a full rebate under Section 87A, effectively making their tax payable ₹0. However, the rebate is only available for taxpayers with a total income of ₹5 lakh or less, and it does not apply to income beyond this threshold. Additionally, Section 87A is applicable for both the old and new tax regimes, but there are certain conditions and restrictions that may apply depending on the chosen regime.
Maximizing the Section 87A Rebate: Tips and Strategies
While the Section 87A rebate is designed to provide relief for taxpayers with lower incomes, there are strategies to ensure you are making the most of this benefit:
Ensure Your Total Income Is Below ₹5 Lakh: To qualify for the Section 87A rebate, your taxable income must be ₹5 lakh or below. It is essential to make sure that you are accurately reporting all income, including salary, business income, and other sources, to remain under this threshold.
Utilize Deductions to Reduce Taxable Income: While the rebate is available for taxpayers with taxable income of ₹5 lakh or less, it is essential to consider deductions under sections like 80C (for investments in Provident Fund, PPF, etc.), 80D (for health insurance premiums), and other eligible deductions. By reducing your taxable income, you increase your chances of qualifying for the full Section 87A rebate.
Tax Planning for the Financial Year: Proactive tax planning throughout the financial year can ensure that you stay within the ₹5 lakh threshold. This may involve adjusting your salary structure, taking advantage of exemptions, and making tax-saving investments.
File Returns on Time: Ensuring timely filing of your returns is crucial. The rebate will be considered only if you file your ITR before the deadline. Late filing can result in penalties and complications, which may reduce your chances of maximizing the rebate.
By following these strategies, you can ensure that you receive the maximum benefit under Section 87A.
How to Avoid Scrutiny Issues While Filing Your Tax Returns
Filing your tax returns accurately and in compliance with tax laws is essential to avoid unnecessary scrutiny by the Income Tax Department. Here are some tips to help you avoid issues during the filing process:
Accurate Reporting of Income: Ensure that all sources of income are accurately reported. This includes salary, business income, rental income, interest income, and capital gains. Underreporting or omitting any income can trigger scrutiny.
Claiming Only Eligible Deductions: Only claim deductions you are eligible for. For example, Section 80C offers deductions for investments in Provident Fund (PF), Public Provident Fund (PPF), and life insurance premiums, among others. Claiming deductions without proper documentation or for ineligible items can attract scrutiny.
TDS and Tax Payments: Ensure that the Tax Deducted at Source (TDS) reflected in your Form 26AS is accurate and matches the income reported. If there are discrepancies, the Income Tax Department may raise a notice for clarification.
Avoiding Overclaiming Rebate: Ensure that the Section 87A rebate is claimed correctly. If your income exceeds ₹5 lakh and you claim the rebate, this will raise a red flag.
File Revised Returns if Needed: If you realize after filing that there were errors or omissions in your return, file a revised return promptly. This shows that you are taking proactive steps to correct any mistakes.
Following these best practices ensures that your return is processed smoothly and minimizes the chances of receiving a scrutiny notice.
How TaxBuddy Can Help You Maximize Your Section 87A Rebate
TaxBuddy is a reliable tax filing platform designed to help you maximize your Section 87A rebate and ensure that your tax filings are accurate and compliant. The platform provides the following benefits:
Automated Calculation of Tax Liability: TaxBuddy calculates your tax liability based on your income and deductions, ensuring that you qualify for the full Section 87A rebate if you meet the income criteria.
Deductions and Rebates Guidance: TaxBuddy helps you identify eligible deductions under various sections, such as 80C, 80D, and more. By guiding you through the process, it ensures that your taxable income is reduced, increasing the chances of receiving the maximum rebate.
Error-Free Filing: TaxBuddy’s system automatically checks for errors and omissions, ensuring your filing is accurate and reducing the risk of scrutiny. The platform also provides recommendations to ensure your return is filed on time.
Expert Assistance: If you need additional guidance, TaxBuddy offers expert assistance. A qualified tax professional can help you navigate complex tax laws and ensure you get the maximum benefit under Section 87A.
By using TaxBuddy, you can simplify the process of claiming your Section 87A rebate and ensure that your tax filing is both accurate and timely.
Conclusion
Section 87A of the Income Tax Act is a valuable tax-saving provision for individuals with a taxable income of ₹5 lakh or less. By understanding how this rebate works and applying strategic tax planning, taxpayers can reduce their tax liability and maximize the benefits available to them. Whether you are claiming deductions under various sections or filing your returns, ensuring accuracy and compliance is key to making the most of the Section 87A rebate. TaxBuddy makes the entire process easier by offering automated tax calculations, error-free filing, and expert assistance. For anyone looking for assistance in tax filing, it is highly recommended to download the TaxBuddy mobile appfor a simplified, secure, and hassle-free experience.
FAQs
Q1: Does TaxBuddy offer both self-filing and expert-assisted plans for ITR filing, or only expert-assisted options?
Yes, TaxBuddy offers both self-filing and expert-assisted plans for ITR filing. The self-filing plan is designed for individuals who are comfortable with the tax filing process and would like to file their returns independently, using the tools provided by the platform. On the other hand, the expert-assisted plan is available for those who prefer professional guidance. TaxBuddy’s expert team will assist with the filing process, ensuring that everything is accurate and compliant with the latest tax laws, making it easier for taxpayers who may find the process complex or confusing.
Q2: Can I claim the Section 87A rebate if my income is more than ₹5 lakh?
No, you cannot claim the Section 87A rebate if your taxable income exceeds ₹5 lakh. This rebate is specifically designed for taxpayers whose total taxable income is ₹5 lakh or less. The purpose of this rebate is to provide relief to those with lower incomes by reducing their tax liability. If your income exceeds ₹5 lakh, you will not be eligible for the rebate and will need to pay taxes based on the applicable tax slabs.
Q3: How do I maximize my Section 87A rebate?
To maximize your Section 87A rebate, you need to ensure that your taxable income remains under ₹5 lakh. This can be achieved by claiming various eligible deductions under sections like 80C (for investments in specified savings instruments), 80D (for insurance premiums), and other available exemptions. The more deductions you claim, the lower your taxable income will be, increasing the chances of qualifying for the Section 87A rebate. TaxBuddy can help identify all possible deductions and ensure that you file your return correctly, maximizing your rebate.
Q4: What happens if I overclaim the Section 87A rebate?
Overclaiming the Section 87A rebate can lead to scrutiny from the Income Tax Department. If you mistakenly claim the rebate when your income exceeds ₹5 lakh, the authorities may flag your return for review. This could lead to penalties, fines, or delayed processing of your return. It is essential to ensure that your total taxable income is under ₹5 lakh before claiming this rebate. Double-checking the accuracy of your income details and deductions can prevent such errors.
Q5: How does TaxBuddy help in maximizing the Section 87A rebate?
TaxBuddy helps in maximizing your Section 87A rebate by accurately calculating your tax liability and ensuring that you meet all eligibility criteria. The platform automatically applies the appropriate deductions to reduce your taxable income to ₹5 lakh or below, which qualifies you for the rebate. TaxBuddy also provides expert assistance if needed, guiding you through the process and ensuring that all available tax-saving opportunities are utilized, so you can maximize your rebate without errors.
Q6: Is the Section 87A rebate available under the new tax regime?
Yes, the Section 87A rebate is available under the new tax regime, provided your taxable income is ₹5 lakh or below. However, to avail of this rebate under the new tax regime, you cannot claim deductions like those available in the old tax regime (such as 80C, 80D, etc.). The new tax regime is designed to simplify tax filing by eliminating deductions, but the Section 87A rebate is still applicable to taxpayers whose income remains under ₹5 lakh after applying the new tax regime’s tax slabs.
Q7: Can I claim the Section 87A rebate for income from capital gains?
Yes, you can claim the Section 87A rebate on income from capital gains, as long as your total taxable income is ₹5 lakh or less. Capital gains, whether short-term or long-term, are included in your overall taxable income. If your total income after deductions is ₹5 lakh or below, you will be eligible for the Section 87A rebate, which will reduce your tax liability.
Q8: Can I claim the Section 87A rebate on income after applying deductions?
Yes, the Section 87A rebate applies to your taxable income after deductions have been applied. If you reduce your taxable income to ₹5 lakh or below through eligible deductions (such as those under Section 80C, 80D, etc.), you will qualify for the rebate. This means that the rebate is not based on your gross income but rather on your taxable income after all deductions and exemptions have been accounted for.
Q9: Is the Section 87A rebate available to senior citizens?
Yes, senior citizens (aged 60 years or above) can claim the Section 87A rebate if their taxable income is ₹5 lakh or less. In addition to this rebate, senior citizens are also eligible for other tax exemptions, such as higher basic exemption limits. It is important to note that the Section 87A rebate applies to the taxable income after deductions have been applied, so even senior citizens must ensure that their taxable income is under ₹5 lakh to claim the rebate.
Q10: What documents do I need to file for the Section 87A rebate?
To claim the Section 87A rebate, you will need the standard documentation required for filing your ITR, including:
Proof of income (such as salary slips, Form 16, or other income sources)
Proof of deductions (such as receipts for investments under Section 80C, insurance premiums under Section 80D, etc.)
Bank statements showing TDS deductions
Any other documents that reflect your total taxable income and eligible deductions
TaxBuddy’s platform helps you organize and upload all required documents, making it easy to ensure you qualify for the rebate and other deductions.
Q11: Is the Section 87A rebate automatic?
Yes, the Section 87A rebate is automatically applied when you file your ITR, provided your income is ₹5 lakh or below and you meet the eligibility criteria. TaxBuddy ensures that this rebate is correctly calculated during the filing process, ensuring that you don’t miss out on it. The platform automatically checks your eligibility and applies the rebate to your tax calculations.
Q12: How does TaxBuddy ensure I get the Section 87A rebate?
TaxBuddy ensures that you receive the Section 87A rebate by accurately calculating your taxable income and applying the necessary deductions to bring it below ₹5 lakh. The platform automatically checks your eligibility for the rebate and ensures it is applied if you qualify. Additionally, TaxBuddy offers expert assistance, so if you need help navigating the filing process or understanding complex tax laws, the experts at TaxBuddy are there to guide you every step of the way.
Comments