TaxTMI 
TaxTMI 
TaxTMI 
Provision relating to ‘tax rebate’ under sections 87 and 87A of Income-tax Act, 1961 are independent,self-contained and mandatory provisions. Tax rebate should be allowed, subject to fulfilment of conditions provided, even in cases of tax at special or concessional rates. A point of view for exploration.
Chapter VIII of Income-tax Act, 1961 contains provisions relating to Rebates in Part A and Reliefs in part B of the Chapter. Various provisions prevailed over different period of time and we find a list relating to rebates as follows:
1[REBATES AND RELIEFS]
- Part A Rebate of income-tax (From Section 87 to Section 88E)
Section 87 and S.87A are reproduced below with highlights added for the nature of provision, main conditions and restrictions:
2[A.—Rebate of income-tax
Rebate to be allowed in computing income-tax.
87. (1) In computing the amount of income-tax on the total income of an assessee with which he is chargeable for any assessment year, there shall be allowed from the amount of income-tax (as computed before allowing the deductions under this Chapter), in accordance with and subject to the provisions of 3[7[sections 87A, 9[****] and 88E], the deductions specified in those sections.
(2) The aggregate amount of the deductions under 8[section 87A 10[****] or section 88E] shall not, in any case, exceed the amount of income-tax (as computed before allowing the deductions under this Chapter) on the total income of the assessee with which he is chargeable for any assessment year.]
87A. Rebate of income-tax in case of certain individuals.-An assessee, being an individual resident in India, whose total income does not exceed 3[5[five hundred thousand] rupees], shall be entitled to a deduction, from the amount of income-tax (as computed before allowing the deductions under this Chapter) on his total income with which he is chargeable for any assessment year, of an amount equal to hundred per cent of such income-tax or an amount of 4[6[twelve thousand and five hundred] rupees], whichever is less.
7[Provided that where the total income of the assessee is chargeable to tax under sub-section (1A) of section 115BAC, and the total income—
(a) does not exceed 8[twelve hundred thousand rupees], the assessee shall be entitled to a deduction from the amount of income-tax (as computed before allowing for the deductions under this Chapter) on his total income with which he is chargeable for any assessment year, of an amount equal to one hundred per cent. of such income-tax or an amount of 9[sixty thousand rupees], whichever is less;
(b) exceeds 10[twelve hundred thousand rupees] and the income-tax payable on such total income exceeds the amount by which the total income is in excess of 10A[twelve hundred thousand rupees], the assessee shall be entitled to a deduction from the amount of income-tax (as computed before allowing the deductions under this Chapter) on his total income, of an amount equal to the amount by which the income-tax payable on such total income is in excess of the amount by which the total income exceeds [twelve hundred thousand rupees].]
[Provided further that the deduction under the first proviso, shall not exceed the amount of income-tax payable as per the rates provided in sub-section (1A) of section 115BAC.]
Unquote- discussion about provisions:
- Mandatory provision:
We find that the provision about rebate allowable is mandatory by use of expression and phrases like:
there shall be allowed from the amount of income-tax
shall be entitled to a deduction…
the assessee shall be entitled to a deduction ….
the assessee shall be entitled to a deduction from the amount of income-tax
Therefore, the deduction is mandatory.
- The rebate is against tax payable:
The rebate is allowable against the amount of tax payable by assessee, at applicable rates in any assessment year on different kind of income which constitute ‘total income’ of eligible assessee. There is no limitation provided in provision relating to rebate as to any special rate of tax or cases in which incentives are allowed.
- Conditions provided are exhaustive:
Conditions provided in the provision are exhaustive about eligibility of type of assessee, conditions about extent of income up to which rebate is allowable, maximum rebate allowable, and limitations of amount of rebate in certain circumstances.
Special rate of tax and concessions :should not be concerned with rebate:
Special rate of tax are provided in tax laws like Income-tax Act for special nature of income or circumstances. In such cases some rates are stated as special rates or specified rate of tax.
Sometimes, special incentives are given for specific purposes and thereby ultimate tax payable is reduced, though rate may be applicable at normal rates.
Some times exemptions ( full or partial) are allowed by way of exemption or deductions.
Therefore, computation of income and tax payable are to be made as per applicable law.
Tax rebate is to be allowed against tax payable, if any. If no tax is payable there will be no tax rebate.
Special rate of tax and concessions should not be concerned with mandatory rebate. If special or concessional rate is applicable, tax payable at such rate in included in total income tax payable. If assessee is entitled for rebate, then rebate should be allowed. It cannot be denied for the reason that special or concessional rate is applied.
In case if there is any provision which restricts mandatory rebate allowable against tax payable, then the provisions of rebate should prevail, as being mandatory.
The computational aspects are not part of discussions of this article. Computation will differ from year to year and according to applicable rate of tax, amount of tax and conditions and limitations of rebate.
Learned readers and other authors are requested to send feedback and their views for brain storming.