Outfoxed by fools; Indian Citizens Being Deceited!

Citizens earning up to Rs5 lakh receive a tax rebate from the IT department.

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Amidst the financial crises due to the outbreak, the government attempts to equipoise the economic saturation. A tax rebate for those whose income is below 5 lakh rupees is announced by the Income Tax department.  This rebate is available under Section 87A.

So how does it work?

Section 87A introduced in Finance Act 2003 was improvised according to the demands. Currently, an individual taxpayer, who is a resident of India for income tax purposes, is entitled to claim a tax rebate up to Rs. 12,500 against his tax liability if your income does not exceed 5 lakh. However, your entitlement to claim the rebate under Section 87A gets lost altogether once the income exceeds this limit. The basic exemption limit of Rs. 2.50 lakh is applicable for all Individuals and HUFs whether resident or non-resident but the rebate under Section 87A is available only to an individual who is a resident.

Also Read: Continuous Rise and fall of The Tax Transfer to States; Adverse Impact on The Devolution

How it actually works?

For normal income, the tax rate between 2.50 lakhs and 5 lakhs is 5% and the tax liability at 5% on 2.50 lakhs comes to exactly 12,500. However, in case, your income comprises of income that is taxed at a higher rate of 15% or 20% you will have to still pay some tax even if your income does not exceed five lakhs. For your income of Rs 5 lakh comprises one lakhs of short-term capital gains on listed shares of one lakh and the balance is your regular income. Your tax liability would be Rs. 22,500, comprised of Rs. 7,500 (5% on 1.50 lakh) +15,000 (15% on 1 lakhs of Short-term capital gain). After rebate of 12500/- you will have to pay Rs. 10,000/- and cess even when your income does not exceed the threshold of five lakhs.

TPT Policy Advocacy & Recommendations

  • Apart from rebating tax, the Income Tax department should educate them about the standardized and itemized deductions. Moreover, amidst the COVID trauma, it should set up tax administration emergency channels to provide emergency monetary support to the temporarily ceased trade. It should redeploy sources to support health authorities. An expert data analytic team should be formulated to support health care authorities in mapping and scrutinizing worst-hit zones.
  • It should also mend its policies like whether or not to adopt a targeted approach considering the downfall of all industries and analyze the consequences of after-tax amendments. Networking should be strengthened to support all major industries of the nation.
Summary
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Outfoxed by fools; Indian Citizens Being Deceited!
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Citizens earning up to Rs5 lakh receive a tax rebate from the IT department.
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THE POLICY TIMES
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