JAYESH SANGHRAJKA & CO.

Chartered Accountants

From the Research Desk______________________________________

New Section 87A of the Income Tax Act, 1961,

Inserted by Finance Bill, 2013-14
In the Budget 2013 Speech, The Finance Minister had said, Nevertheless, I am inclined
to give some relief to the tax payers in the first bracket of Rs. 2 Lakh to Rs. 5 Lakh.
Assuming an inflation rate of 10% and a notional rise in the threshold exemption
from Rs. 2,00,000/- to Rs. 2,20,000/- I propose to provide a tax credit of Rs.
2,000/- to every person who has a total income upto Rs. 5 Lakh.
As stated by the Finance minister above, the detailed explanation of the

newly

inserted section is mentioned below:

The above amendment was bought by inserting a new Section 87A in the
Income Tax Act, 1961.

It is to be noted that, the above amendment does not mean that basic
Exemption Limit has been raised from Rs. 2,00,000/- to Rs. 2,20,000/-.

It is a Rebate and not a deduction, meaning an assessee will get reduction in

the Income tax payable by him.

It is available ONLY to an INDIVIDUAL assessee, resident in India whos

Total Income during the PY does not exceeds Rs. 5 Lakh.

However, the above rebate benefit is not applicable to a super senior citizen,
since he is already fully exempted up to Rs. 5 lakh.

It is applicable for Assessment Year 2014-15 and thereafter.

This Rebate not available to a Non resident individual.

If the total tax payable is less than Rs. 2000/-, rebate is restricted to total
tax payable.

1
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TheInstituteofCharteredAccountantsofIndia.