Rebate on Income Tax

Many taxpayers don't know that the Indian government has given a rebate on their Income Tax liability. If you are one of those people then this article is for you. So, go ahead and read it to understand all about Rebate on income Tax and claim it while filing income Tax Return for the AY 2025-2026.

Happy reading!!

Let’s start by answering a few “frequently asked questions about Rebate on Income” Tax for your better understanding. 

Which section of the Income Tax Act allows rebate?

Section 87A allows a rebate to taxpayers which helps them reduce their income tax liability.

Who can avail the rebate?

Only resident individuals who have a total income up to Rupees 5,00,000/- after Chapter VI-A deductions in a preceding financial year are eligible to claim the rebate under Section 87A.

Therefore, HUFs or firms or companies, or non-resident individuals cannot claim the rebate. Also, super senior citizens (above 80 years of age) are not eligible to claim a rebate under Section 87A, as they have the basic exemption limit of up to Rupees 5,00,000/- (as per the current slab rate) i.e., they don’t have to pay tax if their total income does not exceed the said limit. So, as there is no tax liability arising no rebate is available to them.

What is the maximum amount of rebate one can avail?

As per the provisions of Section 87A, eligible taxpayers (as explained above) can avail 100% of tax payable on their total income or Rupees. 12,500/-, whichever is lower.

Therefore, the maximum rebate amount one can avail under Section 87A is Rupees 12,500/- (for the AY 2022-23 & AY 2023-24).

Which tax liabilities can be adjusted against rebate?

Section 87A rebate can be claimed against the following tax liabilities:-

Normal income which is taxed at the slab rate.

Long-term capital gains (LTCG) on the sale of any capital assets other than listed equity shares as well as equity-oriented schemes of mutual funds under Section 112 of the Income Tax Act, 1961.

Short-term capital gains (STCG) on listed equity shares and equity-oriented schemes of mutual funds under Section 111A of the Income Tax Act, 1961.

Please Note: Rebate under Section 87A cannot be adjusted against tax on long-term capital gains (LTCG) on equity shares and equity-oriented mutual funds under Section 112A of the Income Tax Act, 1961.

How to calculate the net tax payable when the rebate is availed?

With the help of the below illustrative example, we have explained how the calculation of net tax liability is done in case a rebate is claimed. 

Please Note ~ The rebate will be applied to the total tax before adding the Health and Education Cess.

Is a TDS refund available if the rebate is availed?

1. Yes, a TDS refund is available if the rebate is availed under Section 87A.
   
   If your income is subject to TDS, but your total income after Chapter VI-A deductions is less than Rupees. 5,00,000/- you can claim a rebate under Section 87A while filing a return, and you will receive a refund of TDS paid up to Rupees. 12,500/- i.e., the maximum amount of rebate.
2. We hope, the above questions almost clear all your doubts related to rebate on taxes. If you still have any queries or need assistance in filing your Income Tax return then feel free to reach out to our team of experts. We are always happy to help you all :)
3. Social Media caption
4. Don’t forget to avail rebate on your Income Tax liability while filing your Income Tax Return for Assessment Year 2022–2023. To know more about ‘Rebate Under Section 87A” read our detailed article. The link is given below.
5. P.S. ~ If you need any assistance in filing your Income Tax Return then feel free to reach out to us. Our team of experts is just a DM away :)