Income Tax Rebate in India

This article will help you to learn the important sections for income tax rebates under the Income Tax Act, 1961.

What is a Rebate in Income Tax?

An income tax rebate means a partial refund or reduction in the amount of tax owed to the Income Tax Department. It is a benefit provided by the Government of India to encourage savings and investment.

A tax rebate is typically granted for specific reasons, such as:

• Investments

• Deductions

• Tax credits

It helps to lower the overall tax liability of an individual or a company by putting more money back into their pockets. 

Rebates are a way to incentivize financial investments, promote compliance with tax laws, and achieve policy objectives while providing taxpayers with a financial benefit.

NOTE: The government removed most of the tax rebates and deductions in the new tax regime, which was newly introduced in the Union Budget 2023. However, you can claim income tax rebates and deductions under the old tax regime in FY 2023-24. Compare the new tax regime Vs. Old tax regime before filing your Income Tax Returns (ITR).

Example of Tax Rebate in Income Tax

Suppose Mr and Mrs X are senior citizens with a combined annual income of Rs. 8 lakhs in FY 2023-24. They have paid Rs. 60,000 in health insurance premiums for themselves and their dependent parents. They are eligible for a tax rebate of Rs. 60,000 on their health insurance premiums under Section 80D of the Income Tax Act, 1961.

How to Get Income Tax Rebate in India?

To avail of income tax rebate in India, you need to follow these steps:

Step 1: Gather the necessary documents. This includes investment proofs, certificates, receipts, and other relevant documents as per the rebate section you are claiming.

Step 2: File your Income Tax Return (ITR) using the appropriate form. The ITR form that you need to file will depend on your income sources and other factors.

Step 3: Ensure that you accurately report your income deductions and claim the rebate under the appropriate section.

Step 4: Verify and submit your ITR. Once you are satisfied that your ITR is accurate and complete, you can submit it electronically or manually.

If your tax liability is less than the taxes you have already paid (either through TDS or through advance tax payments), you will be eligible for a tax rebate. You will get the income tax refund from the Income Tax Department once your ITR is processed.

Income Tax Rebates Available Under New Tax Regime

The rebate under Section 87A and standard deductions for salaried individuals are available under the new tax regime for the Financial Year 2023-24 (AY 2024-25). 

• Section 87A Rebate: This rebate is available to individuals whose total income does not exceed Rs. 7 lakhs. The rebate amount is Rs. 25,000.

• Standard Deduction: All salaried individuals are eligible for a standard deduction of Rs. 50,000 under the new income tax regime. This deduction is available regardless of whether the individual claims any other deductions or not.

Types of Rebates Available under Old Tax Regime

The following are the types of tax rebates available in the old tax regime in India for FY 2023-24: