Section 87A Rebate for AY 2021-22 kept unchanged by Budget 2020-21

Section 87A Rebate for AY 2021-22 kept unchanged by Budget 2020-21

Section 87A Rebate has not been reduced with increase in basic income tax exemption limit as anticipated but new New Simplified Personal Income Tax Regime comes at a cost of available deductions/exemptions

Thus, the 100 Percent tax rebate under section 87A of the Income Tax Act 1961 up to  total income of Rs. 5 lakhs continues for AY 2021-22

Thus, for those not opting for New Simplified Personal Income Tax Regime, taking into account deduction available under section 80C, income up to Rs. 6.50 lakhs will be out of tax net

Section 87A Rebate for AY 2021-22

The following table shows the impact of the Section 87A Rebate and income tax to be paid by the taxpayers for AY 2021-22:

Total/Taxable Income (Rs.) Income Tax Rebate u/s 87A Net Tax
Rs. 300000/- 2500/- 2500/- Nil
Rs. 350000/- 5000/- 5000/- Nil
Rs. 400000/- 7500/- 7500/- Nil
Rs. 500000/- 12500/- 12500/- Nil
Rs. 500100/- 12520/- Nil 12520/-

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Earlier

the ABCAUS had anticipated a suitable reduction in the rebate to counter increase in tax slab. The Govt. has done more or less so but this time choosing deductions/exemptions over section 87A rebate.

It was anticipated that to balance the revenue loss and at the same time to have something positive to announce, the Finance Minister, in the upcoming Union Budget 2020-21, may announce an increase in the basic exemption limit. This may be followed by downward revision in the section 87A rebate to counter the revenue loss. The rebate may be balanced in such a view that the total loss to the revenue may be minimal. For example, the rebate may either be abolished or be restricted.  The real impact of the revisions in the basic exemption limit and rebate on the revenue foregone would thus be minimal.

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