In the Union Budget 2023 introduced by Union Finance Minister Smt. Nirmala Sitharaman on 1st February 2023, the focus has been shifted on promoting the New Income tax regime sidelining the speculations of increase in the section 80C limit or section 80D limit. In view of incentivizing the A taxpayers who will opt for the new Income tax regime, the limit of rebate u/s. 87A has been proposed to be enhanced from Rs. 5 Lakhs to Rs. 7 Lakhs. In the existing provision of Section 87A, the resident individual is not required to pay the tax if the income does not exceeds Rs. 5 Lakhs.
In the Finance Bill 2023, it has been proposed that for the Individuals opting for the New Income tax regime under section 115BAC, the limit for availing the Rebate has been increased from Rs. 5 Lakhs to Rs. 7 Lakhs. Now, if the person opts for the New Income tax regime and his / her income is not exceeding Rs. 7 Lakhs, then there shall be no Income tax payable payable as the rebate of Rs. 25,000/- is available to the taxpayers.
For the taxpayers opting the Old Income tax regime, the rebate limit for section 87A shall stands at Rs. 5 Lakhs, which means that the rebate amount of Rs. 12,500/- is available to the taxpayer if the income does not exceed Rs. 5 Lakhs.
Let us understand the concept with some examples:-
Under Old Income tax regime
| Particulars | Amount (in Rs.) |
| Gross Total Income | 7,00,000 |
| Less: Deduction under chapter VIA | 2,00,000 |
| Net Total Income | 5,00,000 |
| Tax on above | 12,500 |
| Less: Rebate u/s. 87A | 12,500 |
| Tax payable | Nil |
Under New Income tax regime
| Particulars | Amount (in Rs.) |
| Gross Total Income | 7,00,000 |
| Less: Deduction under chapter VIA (Not available) | – |
| Net Total Income | 7,00,000 |
| Tax on above | 25,000 |
| Less: Rebate u/s. 87A | 25,000 |
| Tax payable | Nil |
So, from the aforesaid examples, we have understand the concept of the Rebate which has been proposed in the Finance Bill 2023.
