Question

What is the amount of maximum rebate under Section 87A for resident individuals having a total income of ₹ 5 lakh ?

• A. ₹ 12,500
• B. ₹ 15,000
• C. ₹ 17,500
• D. ₹ 20,000

Hint:

Find the tax on ₹5 lakh using the slabs. The rebate is the tax or ₹12,500, whichever is less.

Answer 1

The Correct Option is A

Step 1: Understand the rebate:
Section 87A gives a tax rebate to resident individuals with low income. A rebate is a direct cut from the tax payable.

Step 2: Recall the rule:
A resident individual whose total income is ₹5 lakh or less gets a rebate.
The rebate is equal to the income tax payable or ₹12,500, whichever is less.

Step 3: Apply it to ₹5 lakh:
Tax on ₹5,00,000 under the old slab: ₹2,50,000 is nil, and the next ₹2,50,000 is taxed at 5%.
5% of ₹2,50,000 = ₹12,500.
Rebate = lower of ₹12,500 and ₹12,500 = ₹12,500.
Tax payable after rebate = nil.

Step 4: Check the other options:
₹15,000, ₹17,500 and ₹20,000 are more than the tax payable on ₹5 lakh. The rebate can never exceed the tax, so they are wrong.

Final Answer:
The maximum rebate is ₹12,500. This is option (A).