BAJAJ BROKING
July 26, 2024
5 mins read
Are you aiming to lower your tax liability while maximizing your savings? Understanding how to claim a tax rebate on income can help you reduce your tax burden effectively. This guide provides a clear breakdown of eligibility requirements, claim procedures, and essential insights to ensure you make the most of available rebates. Let’s explore who qualifies for tax rebates in India and how they work.
A tax rebate is a financial relief granted by the government when a taxpayer has paid more tax than their actual liability. This often occurs when excess tax is deducted at the source or through advance tax payments. Once the income tax return is filed, the government recalculates the tax dues. If an overpayment is identified, the excess amount is refunded as a rebate, lowering the taxpayer’s total liability.
This mechanism helps ensure tax fairness while encouraging individuals to invest and manage their finances wisely.
Who gets tax rebates? It is for those whose total income is less than 5 lakhs INR in a financial year. If you belong to that category, then congrats, you are eligible for a rebate under Section 87A of the Income Tax Act. The essence of this concept is that, if you are not making that much money, and yet you paid your taxes properly, the government wishes to honor your commitment, and offer you some cashback. That’s about it!
In India, multiple types of income tax rebates are available under the Income Tax Act, offering relief to taxpayers based on their income, investments, and expenditures. These rebates help reduce the overall tax liability, ensuring financial incentives for savings and essential expenses. Below are the key types of income tax rebates that taxpayers can claim:
1. Section 87A – Tax Rebate for Low-Income Earners
This tax rebate on income is available to individuals with a taxable income of up to ₹5 lakh. Those eligible under this section can receive a deduction of up to ₹12,500, effectively bringing their tax obligation down to zero.
2. Section 80C – Rebate on Investments
Under this section, individuals can avail a tax rebate on investments in specific financial instruments. Eligible investments include:
● Employee Provident Fund (EPF)
● Public Provident Fund (PPF)
● National Savings Certificates (NSC)
● Tax-saving Fixed Deposits
● Equity-Linked Savings Schemes (ELSS)
● Life Insurance Premiums
The maximum rebate allowed under this section is ₹1.5 lakh per financial year.
3. Section 80D – Rebate on Health Insurance Premiums
This rebate applies to premiums paid for health insurance policies covering self, spouse, children, and parents. The rebate amount varies based on the insured individual's age and policy coverage.
4. Section 24(b) – Rebate on Home Loan Interest
Individuals can claim a tax rebate on income by deducting interest paid on home loans under Section 24(b). The maximum deduction allowed is ₹2 lakh per financial year.
5. Section 80E – Rebate on Education Loan Interest
Taxpayers repaying education loans for higher studies can claim a deduction on the interest paid under Section 80E. There is no upper limit, but the deduction can be claimed for a maximum of eight years.
6. Section 80G – Rebate on Donations
Contributions to eligible charitable organizations qualify for a rebate under Section 80G. The rebate amount is determined by the type of donation made and the organization receiving it.
To maximize benefits, taxpayers should carefully review eligibility criteria for each rebate and calculate income tax rebates based on their financial commitments.
Let us look into the different types of income tax rebates one by one:
1. Section 87A Rebate: This rebate is offered to any person whose income does not exceed 5 lakhs INR annually. However, there is a ceiling on how much rebate can be offered, and the limit is set at 12,500 INR.
2. Agricultural Income: If a taxpayer has any agricultural income and it is within 5,000 INR, it is not added to taxable income. If the amount is more than 5000 INR, the value above 5000 INR will be added to your total taxable income and is taxed at relevant rates.
3. Interest on Home Loan: One can get a rebate on the interest that they have paid for a home loan. The interest payment that is considered for this is limited to 2 lakhs INR under Section 24(b).
Claiming a tax rebate on income in India requires a structured approach to ensure compliance with tax regulations while maximizing benefits. Follow these essential steps to determine eligibility, calculate your taxable income, and submit an accurate tax return.
1. Check Eligibility
Confirm whether you qualify for a tax rebate based on your income level, investments, or specific conditions such as senior citizen status or disabilities. Eligibility criteria are outlined by the Income Tax Department and vary by rebate section.
2. Compute Taxable Income
Calculate your total taxable income by adding earnings from all sources, including salary, business income, and capital gains. Deduct eligible exemptions and deductions to arrive at your final taxable amount.
3. Identify the Applicable Rebate Section
Determine which section of the Income Tax Act applies to your rebate claim. Common sections include:
● Section 87A – Rebate for individuals with lower income
● Section 80C – Rebate on specific investments
● Section 80D – Rebate on health insurance premiums
4. Collect Required Documents
Gather necessary paperwork such as investment proofs, insurance premium receipts, loan repayment statements, and donation certificates to support your rebate claim.
5. File Your Income Tax Return
Use the correct ITR form based on your income category (e.g., ITR-1, ITR-2). Accurately report your income, deductions, and claim the tax rebate under the appropriate section.
6. Review and Submit
Double-check your tax return for accuracy before submission. File it electronically through the Income Tax Department’s e-filing portal or submit a physical copy if required.
To calculate income tax rebates correctly and avoid errors, consider consulting a tax expert for personalized guidance.
The Indian tax system allows taxpayers to choose between the old tax regime and the new tax regime, each offering different approaches to tax rebates and deductions. Understanding these differences can help individuals decide which regime provides the most savings based on their income and financial commitments.
Rebates Under the Old Tax Regime
The old tax regime continues to allow taxpayers to claim various deductions and exemptions to reduce taxable income. Key deductions include:
● Section 80C: Deduction of up to ₹1.5 lakh on investments such as Public Provident Fund (PPF), Equity-Linked Savings Scheme (ELSS), and National Savings Certificate (NSC).
● Section 80D: Deduction on health insurance premiums for self and dependents.
● Section 24(b): Deduction of up to ₹2 lakh on home loan interest payments.
● Section 80E: Deduction on interest paid on education loans for higher studies.
● Section 80G: Deduction for donations to eligible charitable institutions.
Rebates Under the New Tax Regime
The new tax regime offers lower tax rates but eliminates most exemptions and deductions. However, certain benefits are available:
● Section 87A: This allows individuals earning up to ₹12 lakh in taxable income to receive a rebate of ₹60,000, ensuring no tax is payable.
● Standard Deduction: A deduction of ₹75,000 is applicable for salaried individuals and pensioners.
These changes1 aim to provide significant relief to taxpayers, especially the middle class, by increasing disposable income and encouraging savings and investment.
Calculating a tax rebate on income involves a step-by-step process to determine the exact amount of tax relief available under applicable sections of the Income Tax Act. Follow these key steps to calculate tax rebates accurately:
1. Determine Your Taxable Income
Start by computing your total income from all sources, including salary, business profits, capital gains, and other earnings. Subtract eligible exemptions and deductions to arrive at your taxable income.
2. Identify Eligible Rebates
Check which tax rebates apply to your financial situation. Common sections include:
● Section 87A for individuals with income up to ₹7 lakh
● Section 80C for investments like PPF, ELSS, and tax-saving FDs
● Section 80D for health insurance premiums
● Section 24(b) for home loan interest payments
3. Apply the Relevant Tax Slab
Based on whether you choose the old or new tax regime, apply the applicable tax rate to your taxable income to compute the total tax payable before rebates.
4. Deduct the Rebate Amount
Subtract the eligible tax rebate from the total tax liability. For instance, under Section 87A, if your taxable income is within the limit, you can claim a rebate of up to ₹25,000, reducing your payable tax accordingly.
5. Add Cess and Finalize Tax Liability
A 4% cess is applicable on the total tax payable after rebates. Include this amount to determine the final tax due. If the rebate reduces your tax liability to zero, no further tax payment is required.
For precise calculations, taxpayers can use online tax calculators or consult professionals to ensure accurate claims and maximize tax benefits.
Understanding tax rebates in India can be a headache, but the trouble is worth it. Terms such as tax rebate meaning, income tax exemption, and income tax deduction may help you earn back some money. Whether you stick with the old tax regime or switch to a new one, ensure you claim every rebate you are entitled to. Who does not like extra change jingling in his pocket?
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Disclaimer: Investments in the securities market are subject to market risk, read all related documents carefully before investing.
This content is for educational purposes only. Securities quoted are exemplary and not recommendatory.
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Share this article: 
Yes, you can. Under Section 80C, for a housing loan principal repayment, you can get a tax rebate up to ₹1.5 lakh per financial year. Interest payment comes under a different section altogether. It is allowed under Section 24.
As an NRI, he can claim a rebate on income tax by filing his income tax return and claiming deductions under the relevant sections for investments made in India, like 80C. Make sure that you are fulfilling the eligibility criteria for claiming these deductions.
Under the 80C tax rebate, exemption of ₹1.5 lakh could be made on investments and expenses like PPF, EPF, life insurance premiums, tuition fees, etc.
Yes, you are entitled to a rebate on education expenses since tuition fees paid for the education of any of your children will be eligible for deduction under Section 80C up to the aggregate limit of ₹1.5 lakh.
Yes, senior citizens have higher exemption limits and can also claim additional deductions under Sections 80D (for health insurance premiums) and 80TTB (for interest income up to ₹50,000).
Under Section 80C, you can get a tax rebate by investing in PPF, NSC, ELSS mutual funds, fixed deposits, and life insurance policies. Contributions to the NPS will also give you additional deductions under Section 80CCD.
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