Income Tax Rebate

[PRITAM DASS SHARMA]

[PRITAM DASS SHARMA]

[PRITAM DASS SHARMA]

Usually salary income is chargeable to tax either on due basis or on receipt basis. For the purpose of changeability salary consist of;
1.                  Any salary due from an employer including former employer in the previous year, whether or not actually received.
2.                  Any salary paid or allowed in the previous year by or on behalf of employer including former employer, although not due or before it became due, and
3.                  Any arrears of salary paid or allowed in the previous year by or on behalf of employer including former employer, if not charged to income tax in any of the previous year.
         If an employee is in receipt of any component of his salary in arrears or paid in advance, or receives profit in lieu of salary, he can claim relief as allowed by Section 89 read with rule 21A of Income Tax Act and Income Tax Rules. The relief can be claimed for following;
1.                  Relief in respect of salary or family pension received in arrears or in advance [Rule 21A(2)]
2.                  Relief in respect of gratuity [Rule 21A(3)]
3.                  Relief in respect of compensation on termination of employment [Rule 21A(4)]
4.                  Relief in respect of payment of commutation of pension [Rule 21A(5)]
5.                  Relief in respect of other payment [Rule 21A96)]
Provided that no such relief shall be granted in respect of any amount received or receivable by an assessee on his voluntary retirement or termination of his service, in accordance with any scheme or schemes of voluntary retirement or in the case of a public sector company, if an exemption in respect of any amount received or receivable on such voluntary retirement or termination of his service or voluntary separation has been claimed by the assessee under clause (10C) of section 10 in respect of such, or any other, assessment year.
Now let us elaborate and understand the each case separately.


Relief in respect of salary or family pension received in arrears or in advance [Rule 21A(2)]
       The relief on salary received in arrears or in advance is computed in the manner as refined by rule 21A(2) which is produced as below;
1.                  Calculate the tax payable on the total income, including the salary received in arrears or in advance, of the relevant previous year in which the same is received.
2.                  Calculate the tax payable on the total income, excluding the salary received in arrears or in advance, of the relevant previous year in which the additional salary is received.
3.                  Find out the difference between tax at (1) and (2).
4.                  Compute the tax on the total income after including the salary received in arrears or in advance in the previous year to which such salary relates.
5.         Compute the tax on the total income after excluding the additional salary in the previous year to which such salary relates.
6.                  Find out the difference between tax at (4) and (5).
7.                  Amount of relief: The excess of tax computed at (3) over tax computed at (6)
Relief in respect of gratuity [Rule 21A(3)]
       Relief for gratuity can is claimed if the amount of gratuity received is in excess of gratuity specified under section 10(10). However no relief is permissible if the taxable gratuity is received for less than 5 years of service period. The amount of relief is admissible in the as per following category
1.                  Where gratuity payable is in respect of past service of 15 years or more
          The amount of relief is calculated as follows:
1.                  Compute the average rate of tax on the total income including the gratuity in the year of receipt
2.                  Find out the tax on gratuity at the average tax rate as computed in (1)
3.                  Compute the average rate of tax by adding 1/3 gratuity to preceding 3 previous years
4.                  Find out the average of 3 years average rate as computer in (3) and compute the tax on gratuity at that rate
5.                  Relief admissible : difference between (2) and (4)
      2. Where such period is 5 years or more but less than 15 Years
          The amount of relief for this category , the relief is calculated as on the similar lines of above with only difference that instead of average of average rates of 3 years, the average of average rate of 2 years shall be taken by adding ½ of gratuity to each of two preceding year.
Relief in respect of compensation on termination of employment [Rule 21A(4)]
          If the compensation received by the employee from his current or previous employer at or in relation with termination of his employment after completion of 3 years of service and unexpired portion of his term of employment is more than 3 years, the relief is calculated in the same manner as if gratuity paid to employee in respect of service rendered for a period of 15 years or more.
Relief in respect of payment of commutation of pension [Rule 21A(5)]
        A relief can be claimed in respect of commutation of pension received in excess of limits specified under section 17(1)(ii). Such relief is computed in the same manner as if gratuity paid to employee in respect of service rendered for a period of 15 years or more.
Relief in respect of other payment [Rule 21A(6)]
       In respect of any other payment received by employee other than those specified above, the relief will be granted by the CBDT after examination of circumstances of each case.

        Procedure for claiming the tax relief – In order to claim tax relief under the aforesaid circumstances, the employee should give relevant information in his income tax return.
           Basically relief under section 89 is arithmetical. It involves finding out two tax rates.

[PRITAM DASS SHARMA]

What is Income Tax Rebate?

A Tax rebate is an amount paid by way of reduction, return, or refund on what has already been paid or contributed. The Income Tax Rebate in India is allowed for Individuals whose income falls under the tax slabs. Tax rebate rates are updated for every financial year as per the directions of the Indian government. The modifications made in the rebate structure are announced in Union Budget of the respective year.
Tax Rebate Rs.5,000/-U/s 87A for F.Y.2016-17

Section 87A of the Income Tax Act, 1961 was inserted by the Finance Act, 2013 with effect from 01-04-2014. The section 87A provides for an income tax rebate up to Rs. 2000/-(F.Y 2013-14) to Individuals having Taxable Income not exceeding Rs. 5,00,000/-. In Union Budget 2016, the Income Tax Rebate has been increased from Rs. 2000/- to Rs. 5,000/- and would be applicable from F.Y. 2016-17 onwards. The Rebate of Rs. 5,000/- would be given from the Total Tax payable by an Individual. It is pertinent to note here that this Rs. 5,000/- is to be subtracted from the Total Tax Payable and not from the Total Income of an Individual.
Eligibility for Income Tax Rebate

With a view providing tax relief to the individual assesses who are in lower income bracket a refund is provided for under Section 87A.
The rebate will be available if the assessee satisfies the following eligibility.
1.         The Taxpayer is a resident individual ( may be an ordinary resident or not ordinary resident).
2.         The Total Income or taxable income (i.e. gross total income minus deductions under Section 80C to 80U) is Rs. 5,00,000/- or less.
                  Income Tax Rebate Key Features

The following are the salient features of Income Tax Rebate u/s 87A.
·             Under Section 87A Tax Rebate is only available to Individuals. All categories of Individuals whether female or male or Senior Citizens are eligible to claim Income Tax Rebate as per Section 87A. The taxpayer under the class like HUF, LLP, Partnership Firms, Companies, LLP, etc. is not eligible to claim Income Tax Rebate under this section.
·             Income Tax Rebate u/s 87A is only available to Resident Individuals and not to Non-Resident Individuals.
·             From Financial Year 2016-17 onwards the total rebate allowed under section 87A would be Rs. 5,000/- or the total tax is payable (whichever is less).
·             Income Tax Rebate of Rs. 5,000/- is allowed before the levy of Education Cess and Secondary High Education Cess. In other words, Education Cess and SHEC-Secondary High Education Cess would be levied on the tax payable after allowing for Income Tax Rebate of Rs. 5,000/-.
·             For Super Senior Citizen (Aged above 80 years) There is no benefit of this Rebate as their Income up to Rs. 5,00,000/- is already exempted from the levy of Income Tax.
Note: Rebate under Section 87A is not available for the case of a non-resident individual, resident or non-resident HUF/ AOP/ BOI or any taxpayer other than a resident individual.
Tax Rebate for Senior Citizens

The Income Tax Act, 1961 has made provisions for tax rebates for senior citizens(aged over 65 years). The Section 88B contains all details about such tax rebates. But, the most significant fact about such rebates is that the individual concerned is entitled to receive rebates till Rs. 20,000/- depending upon the amount of tax payable on him.
Note: Rebate benefits u/s 87Ais not available to super senior citizens.
Income Tax Rebate Calculation

As Section 87A provides for Income Tax Rebate, the assessee will first compute the Total Tax Payable and then reduce Rs. 5,000/- from this Tax payable provided his Total Income is less than Rs. 5,00,000/-. If taxpayer’s Total Income is more than Rs. 5,00,000/-, then he won’t be able to claim income tax rebate under Section 87A.
·             The Net Taxable Income of Rs. 5,00,000/- is the total of incomes under all heads i.e. House Property, Salary,  Capital Gains, Business or Profession,  and Other Sources.
·             In case, there is any loss under any head due to the payment of housing loan or for any other reason, such loss would also be deducted from the total income.

·             Tax Deductions from Section 80C to Section 80U under Chapter VI-A would also be allowed, and the resultant figure i.e. Total Income should be less than Rs. 5,00,000/- for an individual to claim income tax rebate of Rs. 5,000/- under Section 87A.

[Baljit]

Re: Evening News February 3, 2019
Section 87A ‘Relief to tax payers’ is being amended to provide relief to the individual taxpayers by increasing the maximum amount of tax rebate to Rs. 12500/- from existing Rs. 2500/- for the taxpayers having total income up to Rs.5 Lakhs, instead of existing Rs. 3.50 Lakhs. No relief would be available in case the total income of individual exceeds Rs. 5 Lakhs.

[Baljit]

[Baljit]

[Baljit]