The highlight of budget 2013 for common man was the Tax Rebate of Rs 2,000 for people with income of less than Rs 5 lakhs. This has been made possible by inserting a new section 87A in the Income Tax Act of 1961. I posted the Income Tax calculator for FY 2013-14 and received a lot of queries regarding the Rs. 2,000 tax rebate.
Who is eligible for Tax Rebate?
Only individuals with income of less than Rs 5 lakh are eligible for Rs. 2,000 tax Rebate. HUFs are not eligible for this rebate.
Which income is considered for Tax Rebate?
The Rs 5 lakh income is net of your gross income and your tax saving investment under Section VI.
What is included under Section VI?
The following tax exemptions are considered under section VI.
- 80 C – Investment in Life Insurance, ELSS, Tax Saving Fixed Deposit, EPF/ VPF Contribution, PPF, NSC, Housing Loan Principal Repayment, Tuition Fee for your children, etc.
- 80CCC – Deduction in respect of Payment of premium for annuity plan of LIC or any other insurer
- 80CCD – Contribution made by Central government Employees in his pension account to the extent of 10% of his salary.
The maximum total tax exemption from all the above three sections 80C, 80CCC and 80CCD shall not exceed Rs 1 lakh.
- 80D – Medical Insurance Premium for self and family members. The maximum exemption is Rs 15,000 (Rs. 20,000 if senior citizen). There is additional Rs 15,000 exemption for medical insurance premium of parents (father/ mother or both). This exemption is Rs 20,000 in case parents are senior citizens.
- 80DD – Deduction in respect of maintenance including medical treatment of dependent who is a person with disability. Maximum deduction Rs. 100,000/- in case of severe disability (more than 80%) and Rs. 50,000/- in other cases.
- 80DDB – Deduction up to Rs. 40,000 (Rs. 60,000 for Senior Citizens) for expenditure actually incurred on self or dependent relative for medical treatment of specified disease or ailment.
- 80E – Deduction of interest of Education Loan
- 80G – Deduction for donation to certain charitable funds, charitable institutions, etc.
- 80GGA – Deduction in respect of certain donations for scientific research or rural development
- 80GGC – Deduction in respect of contributions given by any person to political parties
- 80GG – For paying rent in case you do not receive HRA.
- 80U – Deduction of Rs. 50,000 (Rs 1,00,000 in case of severe disability) to an individual who suffers from physical disability.
If you have a gross income of Rs 6.5 Lakh and invest 1 Lakh in 80C exemption. Also you pay Rs. 50,000 for education Loan interest exemption under sec 80E.
Your taxable income comes to Rs 5 lakhs. So you would be eligible for Rs. 2,000 Tax Rebate under Sec 87A.
In case you have any queries please do let us know through comments.