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What is an Income Tax Rebate, its Type, and How to Get a Tax Rebate in India?

Income tax rebates are a significant aspect of the taxation system in India, designed to provide relief to taxpayers.

  • 2,357 Views | Updated on: Mar 21, 2024

Income tax rebate, also known as income tax deduction or tax relief, is a way to reduce your taxable income and, ultimately, the amount of tax you owe to the government. It allows you to claim certain expenses or investments as deductions, lowering your overall tax liability.

Income tax rebates are essential because they allow individuals and businesses to minimize their tax burden and retain more of their hard-earned money. By offering incentives for certain expenditures or investments, the government aims to encourage economic growth, promote specific sectors, and support individual financial goals.

Understanding the Types of Income Tax Rebates

The Income Tax Act 1961 offers several sections that offer tax rebates on different types of incomes, properties, and investments. Take a look at a few of them:

Section 80C Deductions

Section 80C of the Income Tax Act allows taxpayers to claim deductions for investments in specific financial instruments. Some popular deductions under this section include contributions to Provident Fund (PF), Public Provident Fund (PPF), National Savings Certificate (NSC), and payment of life insurance premiums. So, not only are you saving for the future, but you are also reducing your taxable income in the present.

Section 80D Deductions

Section 80D provides deductions for expenses related to health insurance premiums. You can claim deductions for premiums paid for your spouse, children, and parents. It is like a win-win situation: you are simultaneously protecting your health and getting a tax rebate.

Section 87A Deductions

Section 87A of the Income Tax Act in India provides a deduction in the income tax liability for certain individual taxpayers. As per the latest amendment, in both the old and new tax regimes, a maximum tax refund of ₹12,500 will be granted.

Section 10(14) Deductions

Section 10(14) deductions cover allowances and per your employer provides. It includes house rent allowance (HRA), conveyance allowance, and medical reimbursements. These deductions are a great way to reduce your taxable income and make the most of the benefits offered by your job.

Eligibility Criteria for Income Tax Rebates

One must fulfill the following requirements if they want to apply for a tax rebate:

Annual Income Limitations

The eligibility for income tax rebates often comes with income limitations. Different rebates have different income thresholds, and it is crucial to stay within those limits to qualify for the deductions.

Employment Type and Tax Filing Status

Your employment type and tax filing status also play a role in determining your eligibility for income tax rebates. Whether you are a salaried individual, a freelancer, or a business owner, and whether you file your taxes as an individual or a company, all these factors impact the type of rebates you can claim.

Specific Conditions for Different Types of Rebates

Each rebate comes with its own set of specific conditions. For example, under Section 80C, there is a limit on the maximum amount you can claim. Additionally, some deductions require you to maintain the investment or expense for a certain period to qualify for the rebate.

How to Get a Tax Rebate in India?

There are two ways to get a “tax rebate” in India: a flat reduction in your tax liability due to your income level (Section 87A rebate) or a refund due to overpaid taxes. Here is how to claim each:

Claiming Section 87A Rebate

This rebate applies only to individuals with taxable income below ₹7.5 lakh in the old tax regime. You can claim it in two ways:

  • Automatically upon filing ITR: If your gross taxable income is less than ₹5 lakh, the rebate is automatically applied while filing your Income Tax Return (ITR) using forms like ITR-1 or ITR-2.
  • Manually claim via ITR: If your taxable income falls between ₹5 lakh and ₹7.5 lakh, you must manually claim the rebate under Section 87A while filing your ITR.

Claiming Tax Refund (Due to Overpaid Taxes)

Income tax return applies to anyone who has paid more tax than their actual tax liability. Here is how to claim it:

  • File your ITR before the deadline: This is crucial in initiating the assessment process.
  • Ensure accurate income and deduction reporting: Provide proper documentation for all your income sources and deductions claimed.
  • Verify your Form 26AS: This document shows all taxes deducted at source (TDS) by your employers or banks. Ensure it aligns with your income declaration.
  • Wait for refund processing: After successful ITR filing and assessment, the excess tax paid (if any) will be refunded within a couple of months. You can track the refund status on the e-filing portal.

Way Forward

Understanding and claiming the various income tax rebates available can significantly reduce your tax burden and keep more of your hard-earned money. Take the time to research your eligibility, gather your documents, and file your taxes strategically. Remember, maximizing your rebates is not just about saving money; it is about taking control of your finances and investing in your future.

Key Takeaways

  • An income tax rebate saves money from your taxable income through various Income Tax Act sections.
  • Various Sections under the Income Tax Act 1961 offer tax rebates, such as Section 80C, Section 87A, Section 80D, etc.
  • To avail of tax rebates, one must fall within the tax bracket of a certain limit and fulfill the specific requirements needed by different sections.
  • You can claim an income tax rebate through section 87A if you are under a certain income bracket.
  • If you have paid tax over your tax liability, you can apply for a tax rebate by filing an ITR.

- A Consumer Education Initiative series by Kotak Life

Amit Raje
Written By :
Amit Raje

Amit Raje is an experienced marketer who has worked in various Fintechs and leading Financial companies in India. With focused experience in Digital, Amit has pioneered multiple digital commerce in India. Now, close to two decades later, he is the vice president and head of the D2C business department. He masters the skill of strategic management, also being certified in it from IIMA. He has challenged his challenges and contributed his efforts in this journey of digital transformation.

Amit Raje
Reviewed By :
Prasad Pimple

Prasad Pimple has a decade-long experience in the Life insurance sector and as EVP, Kotak Life heads Digital Business. He is responsible for developing user friendly product journeys, creating consumer awareness and helping consumers in identifying need for life insurance solutions. He has 20+ years of experience in creating and building business verticals across Insurance, Telecom and Banking sectors

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