Inception and Overview

Any government's first obligation is to protect its population, and the Indian government is continuously trying to fulfill this aim. To assist the government in achieving this goal, the people of India are expected to pay taxes based on their income. Taxes assist the government in developing the nation's infrastructure. However, Indian tax law has several measures for reducing tax responsibilities, one of which is Section 87A of the Income Tax, 1961. People who earn less than a certain amount of money are eligible for an income tax rebate under Section 87A. Essentially, the purpose of this act is to reduce the tax burden for those in lower-income brackets.


The government launched the tax refund plan by adopting Section 87A in the Income Tax Act to give assistance and reduce the burden on small taxpayers. The Finance Act of 2003 added Section 87A to the Income Tax Act. According to the Income Tax Act, any person who is a resident of India and has taxable income that is less than the exemption level is entitled to a refund of a specified amount.

Section 87A – Income Tax Rebate

Tax refunds under Section 87A are available to anyone who pays less than 10% of their income in taxes. Anyone having an annual income of less than Rs.5 Lakhs can seek a tax refund under Section 87A of the Income Tax Act, 1961. This indicates that an individual may be eligible for a tax refund of up to Rs.2,000.The catch in this scenario will be Rs. 2000 or 100% of personal income, whichever is smaller. Individuals, not Hindu families, BOI / AOP, Companies, or Firms, are liable for paying income tax under Section 87A. Furthermore, the total amount of the rebate cannot exceed the amount of tax collected before subtracting the person's entire income in the assessment year in which he or she would be taxed.

Section 87A – Things to Keep in Mind

The Income Tax Act, 1961 has been amended to include Section 87A, which takes effect on April 1st of the fiscal year. This legislation governs a tax assessment year as well as future tax assessment years.


Here are the things you must keep in mind when it comes to Section 87A:

  • This tax credit is not available to non-residential Indians. This tax deduction relief is exclusively available to Indian residents.

  • This tax rebate is available to both female and male taxpayers.

  • Under Section 87A, super elderly people are not entitled to a tax rebate.

  • Section 87A of the Income Tax Act also limits the tax rebate to the amount of tax owed if it is lower than Rs.2,000.

Section 87a – Claim Procedure

  1. Section 87A allows a person with an annual income of less than Rs.5 Lakhs but a tax due of more than Rs.2,000 to claim an income tax refund. This may be done while filing your income tax return, just after you've included the higher and secondary education cess or the education cess.

  2. Tax Liability Is Adjusted Against Rebate. This rebate may be used for tax purposes due to the general income taxable income, as well as for long-term gains, as defined in Section 112 of the Income Tax Act. (Section 112 of the Internal Revenue Code applies to short-term long-term gains in the sale of any principal asset except listed equity shares and equity fund schemes.)


This rebate is available with respect to short-term interest-based tax liability on listed equity shares and joint venture fund schemes, which are subject to 15% tax under Section 111A of the Act.

Know What’s the Section 87A Income Tax Rebate Eligibility Criteria

If you satisfy the following criteria, you may be eligible for a tax rebate under Section 87A of the Income Tax Act:

  • You must be an Indian resident.

  • An individual's total income, minus Section 80 deductions, must be equal to or less than INR 5 Lakhs.

  • Refunds of up to INR 12,500 are possible. In this way, if a person pays less than INR 12,500 in income tax, the amount is eligible for a rebate under Section 87A. Prior to applying for an Education Cess, this income tax return is subject to full tax (4%).

How to Apply for a Section 87A Tax Refund

Now that you know what the eligibility criteria is, let’s find out how you can apply for a Section 87A Tax Refund. Here’s what you’ll have to do:

  1. Determine your overall gross income for the fiscal year.

  2. Tax deductions for tax savings, investments and other items are reduced.

  3. Subtract your income tax deductions from your total income to arrive at your total income.

  4. Declare your gross income and tax deductions on an income tax return.

  5. If your total income does not exceed Rs 5 Lakhs, you can claim a tax credit under section 87A. For the AY 2020-21, the maximum refund under section 87A is Rs 12,500.

  6. Fill in the value of the tax amount in the field headed "Rebate under Section 87A" on any ITR form, such as ITR 1, ITR 2, ITR 4, and so on, to claim an exemption under Section 87A.


The Section 87A tax refund is an excellent way to save money on income taxes in India throughout a fiscal year. It is nevertheless critical to save taxes with key investments such as a life insurance policy that is both tax-saving and financially beneficial.


To read more about income tax and how you can save on taxes, explore tax related articles on Bajaj Markets.

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