Budget 2017, rationalized the rebate allowable under section 87A which
will provide the tax benefit of over additional Rs. 50000.
In view of proposed rationalisation of tax rates( 5% instead of 10%) for
individuals in the income slab of Rs. 2,50,000 to Rs.5,00,000,it is proposed to
amend section 87A so as to reduce the maximum amount of rebate available under
this section from existing Rs. 5000 to Rs. 2500.
It is also proposed to provide that this rebate shall be available to
only resident individuals whose total income does not exceed Rs. 3,00,000.
This can be understand more clearly with help of following example :
In case of individual earning upto Rs. 3 lakh ,
taxable income becomes Rs. 50,000 (Tax rate 5% for tax slab of 2.5 to 5
lakh)
on which his gross liability of tax comes Rs. 2500 and
he will get rebate under section 87A of Rs. 2500.
Thus his net tax liability will come nil.
The existing
provisions of section 87A provide for a rebate up to Rs. 5000 from the
income-tax payable to a resident individual if this total income does not
exceed Rs. 5,00,000.
This amendment
will take effect from the previous year 2017-2018.
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