Quick Summary
Tax Rebate is a direct reduction from the tax liability calculated on total income. It is different from deductions which reduce taxable income - rebates reduce the tax amount itself.
A Tax Rebate is a reduction in the actual tax liability. Unlike deductions which reduce taxable income, rebates are subtracted directly from the tax calculated on total income. The most common rebate in India is under Section 87A.
Section 87A Rebate
Section 87A provides a rebate to resident individuals whose total income does not exceed specified limits:
| Tax Regime | Income Limit | Maximum Rebate |
|---|---|---|
| New Tax Regime (FY 2024-25) | ₹7,00,000 | ₹25,000 |
| Old Tax Regime | ₹5,00,000 | ₹12,500 |
Eligibility for Section 87A Rebate
- Must be a Resident Individual
- Total income after deductions must not exceed the threshold
- Not available to Non-Resident Indians (NRIs)
- Not available to HUF, Companies, or Firms
- Applied before adding Health and Education Cess
Difference Between Rebate and Deduction
| Aspect | Tax Rebate | Tax Deduction |
|---|---|---|
| Effect on | Tax amount | Taxable income |
| Calculation stage | After computing tax | Before computing tax |
| Example | Section 87A | Section 80C, 80D |
Other Types of Rebates
- Section 87A: For individuals with income up to specified limits
- Section 89(1): Relief for arrears of salary
- Export incentives: Rebates on export duties
- State-specific rebates: Professional tax rebates
Key Points
- Direct reduction from tax liability
- Section 87A: Up to ₹25,000 rebate (new regime)
- Section 87A: Up to ₹12,500 rebate (old regime)
- Available only to resident individuals
- Applied before adding cess
- Different from deductions which reduce income