Maximising Tax Rebate Under Section 87A: Key Insights

In Indian taxation, strategically maximising tax relief is vital. Section 87A provides rebates to eligible taxpayers, and this exploration offers key insights on optimising these benefits, guiding individuals through the intricacies of the provision.

Section 87A of the Income-tax Act in India offers a tax rebate for residents earning less than Rs. 5,00,000 annually. The rebate amount is up to Rs. 12,500 or the total taxes due, whichever is less. It acts as a financial cushion, immediately reducing tax liability upon completing all tax calculations. When considering financial planning, exploring health insurance online to secure comprehensive coverage for oneself and family members is advisable.

Eligibility Criteria:

To qualify, individuals must be Indian citizens, not part of Hindu Undivided Families (HUFs), and have no income from sources outside India. Eligibility varies by age – individuals under 60, seniors (60 to 80), and super senior citizens (above 80) qualify if their total income is below the specified limit.

Applicability In Tax Regimes:

The rebate is applicable in both old and new tax regimes. Under the old system, individuals with an annual income of up to Rs. 5 lakh could claim a refund of Rs. 12,500. The rebate remains the same in the new regime, but individuals lose certain tax breaks and exemptions.

Calculating Rebate:

The rebate is computed after considering applicable exemptions and deductions. If the total income is equal to or less than Rs. 5 lakh, the maximum rebate of Rs. 12,500 applies. The rebate gradually decreases beyond this income threshold.

The rebate is computed after considering applicable exemptions and deductions. If the total income is equal to or less than Rs. 5 lakh, the maximum rebate of Rs. 12,500 applies. The rebate gradually decreases beyond this income threshold.

Here’s a breakdown of the two most common methods:

Percentage-based rebate:

This is the most straightforward method. The rebate amount is a fixed percentage of the purchase price. Here’s how to calculate it:

  • Convert the rebate percentage into a decimal: Divide the percentage by 100. For example, a 15% rebate becomes 15 / 100 = 0.15.
  • Multiply the decimal by the purchase price: This gives you the amount of the rebate.

For example, if you buy a product for $350 with a 15% rebate:

  • Rebate decimal = 0.15
  • Rebate amount = 0.15 * $350 = $52.50

Tiered rebate:

Some rebates offer increasing discounts based on reaching specific purchase thresholds. Here, the calculation involves finding which tier you qualify for and applying the corresponding rebate amount.

Unfortunately, calculating tiered rebates can be more complex as it depends on the specific program’s structure. You’ll typically need to refer to the program’s details to understand the qualification criteria and rebate amounts for each tier.

Here are some additional tips for calculating rebates:

  • Read the fine print: Rebate programs often have exclusions and limitations. Make sure you understand all the terms and conditions before calculating your potential rebate.
  • Keep your receipts: You’ll typically need proof of purchase to claim your rebate.
  • Consider mail-in vs. instant rebates: Mail-in rebates can take longer to receive, but instant rebates might be reflected at checkout.

Redeeming The Rebate:

To claim the rebate, individuals must confirm eligibility, determine their tax obligation after deductions, and apply the rebate to offset tax liability. Completing and submitting the relevant sections of the tax return form is crucial.

Determining Tax Liability After Rebate:

After claiming the rebate, individuals must determine their tax liability by considering overall income, applying relevant tax slab rates, and deducting the rebate amount from the determined tax liability.

Advantages And Consequences:

The Section 87A rebate offers significant advantages, lowering tax obligations by up to Rs. 12,500, increasing disposable income, and providing relief to small business owners and salaried workers. **

For those in lower income brackets, Section 87A rebate in the Indian Income Tax Act provides a means to reduce tax burdens, potentially saving up to Rs. 12,500 annually.


In conclusion, leveraging tax benefits under Section 87A is a financial strategy and an opportunity to safeguard one’s health and that of their parents. Consider comprehensive health insurance plans for parents to align their financial goals with the well-being of loved ones. If you choose Bajaj Allianz as your insurance provider, ensure that you carry out the process of Bajaj Allianz health insurance renewal on time for uninterrupted coverage. Claims are subject to terms and conditions set forth under the health insurance policy. *

Maximising tax rebates under Section 87A and proactive online health insurance planning ensures a holistic approach to financial security. By staying informed and taking advantage of these opportunities, individuals can optimise their tax position and contribute to their long-term financial health. **

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*Standard T&C Apply

Tax benefits are subject to change in prevalent tax laws.

Disclaimer: The content on this page is generic and shared only for informational and explanatory purposes. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making any related decisions.

Insurance is the subject matter of solicitation. For more details on benefits, exclusions, limitations, terms, and conditions, please read the sales brochure/policy wording carefully before concluding a sale.

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