Revised Tax Rebate Under Section 87A (FY 2019-2020) Explained

Published: February 1, 2019 at 2:53 pm

Last Updated on

The interim budget announced on 1st Feb 2019 has proposed a change in the tax rebate under section 87A. Here is how it will work.

 Revised Tax Rebate Under Section 87A (FY 2019-2020)

If you are resident individual and your total income after all eligible deductions is equal to or less than 5 lakh, then a rebate of Rs. 12500 applies to the total tax payable before 4% educational cess. If your tax payable before cess is less than Rs. 12500 then that entire amount is discounted.

According to the finance bill 2019,

In section 87A of the Income-tax Act, with effect from the 1st day of April, 2020,––
(a) for the words “three hundred fifty thousand”, the words “five hundred thousand” shall be
(b) for the words “two thousand and five hundred”, the words “twelve thousand and five hundred”
shall be substituted.

This means that if your taxable income after all deduction is equal to Rs. 5L or less, than from the tax payable before cess, an amount of Rs. 12,500 will be discounted.

 Revised Tax Rebate Under Section 87A (FY 2019-2020) Explained

Examples of the revised Tax Rebate under Section 87A

Your total annual income is Rs. 7.25 L

All eligible deductions like 80C+ 80D + others = 2.25L (for e.g.)

Net taxable income = 5L

Old rule:  Net tax before cess: 12,500 and 13,000 with cess.

New rule: Net tax = 0. So saving = Rs. 13,000

Your total annual income is 8L

Net taxable income after all deductions is 5.5L

Old Rule: tax payable before cess: 22,500 and Rs. 23,400

New Rule: tax payable before cess: 22,500 and Rs. 23,400. No saving. The rebate will apply only if the net taxable income is equal to less than 5 lakh.

Here are more examples

zero percent tax slab illustration

Tax is zero if the net taxable income is less than 5 lakh

Section 87A rebate does not apply if the net income is even one rupee above five lakhs


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