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what is tax credit??????
Budget 2013 (P.y 13-14 & A.y 14-15) Persons whose income is upto Rs 5lakhs will get a tax credit of Rs 2000.They will get a rebate of Rs 2000 undernewly inserted section 87A in IncomeTax Act.As per new section 87A,“An assessee, being an individualresidentin India, whose total income does notexceed five hundred thousand rupees,shall be entitled to a deduction, fromtheamount of income-tax (as computedbefore allowing the deductions underthisChapter) on his / her total income withwhich he/she is chargeable for anyassessment year, of an amount equaltohundred per cent of such income-taxoran amount of two thousand rupees,whichever is less.”Myth / Wrong understandingMany people think that the exemptionlimit is increased from Rs 2 lakh to Rs2.2lakh.Some think that you need to claimrefundof Rs 2000 after you file the return.But above understanding is NOTCorrect.Correct Understanding : Taxpayers inRs2-5 lakhs slab will get a rebate of Rs2000under section 87A and will claim thisrebate while filing the returns & willreduce their tax liability.Whether the basic exemption limithas been raised from Rs 2 lakhs to Rs2.20 lakhs ?No. The existing slabs and rates havebeen kept unchanged.Tax on income from 2 lakh to 5 lakh isat10%,up to Rs 10 lakh at 20% andabove 10 lakh at 30%.Only taxpayers in Rs 2-5 lakhs slab willget a rebate of Rs 2000 under section87AFrom when this new rebate isavailable?This new section (87A) has beeninsertedw.e.f 01-April-2014 and will beapplicablefor Assessment year 2014-2015 &onwards.For the income earned in 2013-2014,youwill get this rebate.If my tax due is less than Rs 2000,before claiming this rebate, will I geta refund ?No. the rebate is restricted to amountoftax payable upto maximum of Rs 2000.Soif your Income is Rs 2,10,000 after alldeductions and your tax liability is Rs1000, you will get rebate of whole Rs1000 under new section 87A and notaxwill be payable.If my salary package CTC is Rs 6 lakhs,can I claim this rebate ?May be. It will depends on the “TotalIncome” under Income Tax Act. TotalIncome is calculated after claiming alldeductions (80C, 80D etc) from theGrosstotal taxable income. So if your NetTaxable income is below Rs 5 lakhs,youcan claim rebate of Rs 2000 undersection87A of Income Tax Act.Whether this rebate is also availableto Non resident?No , Rebate under section 87A is notavailable to non resident persons(NRI).AUTHOR VIEWSWhy finance minister has introducedthis tax credit rather than increasingthe exemption limit to Rs 2.2 lakhs ?It would have same effect.Valid question. There may be couple ofreasons for this, If Chidambaram hadraised the exemption limit to Rs 2.2lakhs,1) then Senior citizen would not havegotbenefit as exemption limit for them isalready 2.5 lakhs. But now Seniorcitizencan also claim rebate under section87A.2) those who would be in the Rs 2-2.2lakh income bracket will fall out of thereturn filing net and government don’twants this.
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