Due to which now those having an annual income of seven lakh rupees will not have to pay any tax. However, this can be possible due to the rebate given by the government. This exemption is available under Section 87A of the Income Tax Act. In 2013-2014, tax rebate was introduced under Section 87A through the Government of India. Presenting the Union Budget 2023-24 on February 1, 2023, Finance Minister Nirmala Sitharaman has announced a change in this income tax exemption under the new income tax regime. Let’s know about it…

What is Income Tax Rebate?

Simply put, income tax rebate is a form of refund on your income. The Income Tax (IT) Department provides this refund or exemption under certain circumstances. Taxpayers are liable to get income tax rebate when they have paid tax in excess of the amount payable to the Income Tax Department in a financial year. To avail income tax exemption, you must ensure that you calculate your tax liability correctly and file your income tax return within the stipulated time.

What is section 87A?

Under the provisions of section 87A of the Income Tax Act, a resident Indian individual whose total income for the financial year does not exceed the prescribed limit, is provided a rebate of 100% on the income tax payable. Till the financial year 2022-23, the income limit for claiming exemption under section 87A was Rs 5 lakh. This means that for the financial year 2022-23, a person whose income was up to Rs 5 lakh was not required to pay any income tax.

Tax Exemption

The maximum income limit for claiming exemption under section 87A has been amended from time to time. In the Union Budget 2019, the government increased the maximum limit of net taxable income to Rs 5 lakh for claiming exemption under section 87A. At the same time, in the Union Budget 2023, Finance Minister Nirmala Sitharaman announced that the rebate under Section 87A will be increased from Rs 5 lakh to Rs 7 lakh, which has brought a big sigh of relief for India’s growing middle class population.

Tax Slab

In the new tax regime, the exemption limit has now been increased to Rs 7 lakh. Thus, in the new tax system, people with income up to Rs 7 lakh will not have to pay any tax. This means that from FY 2023-24 an individual taxpayer who is a resident of India will now be entitled to claim income tax rebate of 100% of the income tax payable on total income above Rs 7 lakh.

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After the announcement of the Finance Minister, especially middle class salary employees are looking for saving options to save tax. However, only those who have opted for the old tax regime will get tax relief through savings. If you have not done this, then from April 1, 2023, the new tax system will be implemented by default. In such a situation, apart from 80C, there are many options related to savings to save tax.

National Pension Scheme

National Pension Scheme (NPS) is a good option to save and save tax. Along with this, this system also secures your old age. Under section 80CCD (1B), if you invest in the National Pension Scheme, you get an additional tax rebate of up to Rs 50,000. If someone has crossed his annual investment limit of Rs 1.50 lakh, he can get tax exemption by investing up to Rs 50,000 in a financial year in NPS.

Tax exemption on home loan

Home loan is a good option to save tax. Tax exemption can be availed on home loan interest up to Rs 2 lakh. For this, the taxpayer will have to tell about the loan and its EMI and interest payment while filing the return.

Let us tell you that you will get this exemption only when you are living in that unit or that unit should be in your name. Under section 80TTA of Income Tax, you can get relief from TDS in interest up to Rs 10,000 in a financial year. This rule applies to all bank’s savings accounts. If you have more than one savings account, the taxpayer is advised to calculate the interest earned from all the accounts. At the same time, senior citizens can get tax exemption of up to Rs 50 thousand in interest under section 80TTB.

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