Income Tax Rebate in India

An income tax rebate in India is a financial incentive provided by the Government of India to the taxpayers. It allows you to reduce your overall tax liability. A tax rebate is designed to encourage certain investments, such as savings, investments in specific instruments, or contributions to specific funds.

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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:

Section under IT Act	Type of Rebate	Description
Section 87A	Rebate for Individuals	A rebate of up to Rs. 12,500 for individuals with total income below Rs.5 lakhs.
Section 16	Standard Deduction	Individuals with salary income can claim standard deductions of up to Rs. 50,000.
Section 10(14)	HRA Exemption	Exemption on House Rent Allowance (HRA) received by salaried individuals for rent paid.
Section 24(b)	Home Loan Interest Deduction	Deduction of up to Rs. 2 lakhs on interest paid on home loans for a self-occupied property.
Section 80C	Deductions on Investments	Deductions on various investments such as Provident Fund, PPF, ELSS, and more, up to Rs. 1.5 lakhs.
Section 80CCF	Infrastructure Bonds	Deduction for investments in long-term infrastructure bonds.
Section 80D	Health Insurance Premium	Deduction on premiums paid for health insurance policies, subject to specified limits.
Section 80DD	Deduction for Disabled	Deduction for maintenance of a disabled dependent, subject to specified conditions.
Section 80DDB	Medical Treatment Expenses	Deduction for medical treatment expenses for specified diseases for self or dependents.
Section 80E	Education Loan Interest	Deduction on interest paid on education loans for self, spouse, or children.
Section 80GG	Rent Paid Deduction	Deduction for individuals who do not receive HRA but pay rent. Subject to conditions.
Section 80TTA	Savings Account Interest	Deduction of up to Rs. 10,000 on interest earned from a savings account.
Section 10(5)	Agricultural Income	Exemption on agricultural income earned by individuals.
Section 10(34)	Dividend Income	Exemption on dividend income received from Indian companies.
Section 10(38)	Long-term Capital Gains	Exemption on long-term capital gains on the sale of specified assets.
Section 80G	Donations	Deduction for donations made to specified charitable institutions.
Section 80GGA	Scientific Research	Deduction on donations made to certain approved organizations for scientific research or rural development.
Section 80GGC	Political Contributions	Deduction for contributions made to political parties or electoral trusts.
Section 80RRB	Royalty Income Deduction	Deduction on royalty income received by authors of certain books, subject to specified conditions.
Section 80U	Disability Deduction	Deduction for individuals with disabilities, subject to specified conditions.
Section 10(16)	Family Pension	Exemption on family pension received by the widow or children of a deceased employee.
Section 54	Capital Gains on Property	Exemption on capital gains from the sale of residential property, subject to conditions.
Section 54EC	Capital Gains Bonds	Exemption on capital gains reinvested in specified bonds within six months.
Section 54F	Capital Gains on Assets	Exemption on capital gains when the sale proceeds are reinvested in specified assets.

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FAQ's

Who is eligible for tax rebate in India?

Individual taxpayers who are resident individuals are eligible for a tax rebate under Section 87A of the Income Tax Act when their total income does not exceed Rs. 5 lakhs under the old tax regime and up to Rs. 7 lakhs under the new tax regime.
What is the maximum tax rebate in India?

The maximum tax rebate in India in 2023 under the new tax regime is Rs. 25,000. This rebate is available under Section 87A of the Income Tax Act to individuals with a taxable income of up to Rs. 7 lakh who opt for the new tax regime. In the old tax regime, the maximum tax rebate is Rs. 12,500, along with other tax deductions and exemptions.
How will I get a tax rebate?
To get a tax rebate in India, you must follow these steps:
- Check your eligibility
- File your income tax return (ITR)
- Claim the tax rebate in your ITR form
- Submit your ITR form
How is Rs. 7 lakhs income tax-free?

According to the Union Budget 2023-24, individual taxpayers with an income of up to Rs. 7 lakh will not have to pay any income tax under the new tax regime. This is because the government has introduced a tax rebate of Rs. 25,000 under Section 87A of the Income Tax Act for taxpayers with a taxable income of up to Rs. 7 lakh who opt for the new tax regime.

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*All savings are provided by the insurer as per the IRDAI approved insurance plan.
^The tax benefits under Section 80C allow a deduction of up to ₹1.5 lakhs from the taxable income per year and 10(10D) tax benefits are for investments made up to ₹2.5 Lakhs/ year for policies bought after 1 Feb 2021. Tax benefits and savings are subject to changes in tax laws.
¶Long-term capital gains (LTCG) tax (12.5%) is exempted on annual premiums up to 2.5 lacs.
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