In Budget 2016, Indian Finance Minister increased the tax rebate under section 87A from 2000INR to 5000INR. The section 87A says following:
The requirement to avail tax rebate u/s 87A
- Resident Indian
- The net taxable income <= INR 5 Lakh
- the tax rebate that can be obtained is 5000 INR or actual tax payabal, whichever is less
If my salary slip says that I will be paying x INR tax this financial year. Then how much minimum investment I need to do to avoid any tax?
I have few doubts:
Q1. Does salary slip considers this rebate amount? In other words, if my salary slip says that company has already cut amount y INR as tax and is yet to cut (x-y), do these figures already consider the ribate u/s 87A? Or can I rephrase this question as "does tax deduction at source considers this rebate u/s 87A"
Q2. Do I have to explicitly specify this claim under 87A in my ITR?
This page says:
b. For salaried employees w.r.t. 87A of Income Tax Act as informed by Income Tax Department (ITD), rebate u/s 87A may be claimed by an Assessee in the Income Tax Return (ITR) only. There is no provision for reporting the same in the TDS/TCS statement. CPC-TDS may generate default for short deduction in case the same is considered for TDS computation but not reported in salary statement Form 24Q.
c. Therefore it's advisable for SALARIED EMPLOYEES to claim rebate through filing Income Tax Return (ITR), even though employer has considered rebate while deducting tax at source (i.e. TDS).
Q3. If above is true, and x is not calculated by considering this rebate amount, should I be making investment of (x-5000) * 10, to avoid any tax. So for example if x = 11000, then I have to do investment of (11000-5000)*10 = 60000 INR instead of 11000*10=110000 INR. Is this calculation correct?
Q4. Will this increment of tax rebate from 2000INR to 5000INR will be applicable immediately this year, that is will I be able to specify it for claim in April 2016 when I fill my ITR. Or will it be old 2000INR only?