Tax Rebate u/s 156 Income Tax Act 2025 Key Points

Under Section 156 of the Income-tax Act, 2025, resident individuals are provided significant relief from their tax liability through an income-tax rebate.

Key Points about tax rebate u/s 156

Here are the key points regarding the rebate under Section 156:

• Eligibility: The rebate is exclusively available to an individual resident in India.
• Rebate under the New Tax Regime (Section 202(1)):
  • If the resident individual’s total income does not exceed ₹12,00,000, they are entitled to a 100% rebate on their income-tax payable or ₹60,000, whichever is less. This effectively makes income up to ₹12 Lakhs entirely tax-free.
  • Marginal Relief: If the total income slightly exceeds ₹12,00,000, and the tax payable turns out to be higher than the income earned above the ₹12 lakh mark, a marginal relief is provided. The rebate will be an amount equal to the difference by which the tax payable exceeds the income over ₹12 lakhs.
• Rebate under the Old Tax Regime: For those who opt out of the new tax regime, the rebate limits are much lower. They are entitled to a 100% deduction of income-tax payable or ₹12,500, whichever is less, strictly provided their total income does not exceed ₹5,00,000.
• Maximum Cap: The rebate granted under Section 156 can never exceed the total income-tax actually payable (computed before allowing this deduction) on the assessee’s total income.

Example on tax rebate u/s 156

Here are a few practical examples illustrating how the tax rebate under Section 156 of the new Income-tax Act, 2025 is calculated for resident individuals:

Example 1: Under the New Tax Regime (Income up to ₹12 Lakhs)

Suppose a resident individual, Mr. A, opts for the new tax regime and has a total taxable income of ₹11,00,000.

• Tax Calculation (as per Section 202(1) slabs):
  • Up to ₹4,00,000: Nil
  • ₹4,00,001 to ₹8,00,000 (at 5%): ₹20,000
  • ₹8,00,001 to ₹11,00,000 (at 10%): ₹30,000
  • Total Tax Payable: ₹50,000
• Rebate u/s 156(2)(a): Because his total income does not exceed ₹12,00,000, he is entitled to a 100% rebate on his income tax payable, subject to a maximum cap of ₹60,000.
• Final Tax Liability: Mr. A receives a full rebate of ₹50,000, making his final tax payable ₹0.

Example 2: Marginal Relief under the New Tax Regime (Income slightly over ₹12 Lakhs)

Suppose Mr. B also opts for the new tax regime, but his total income is ₹12,10,000. Because he crossed the ₹12 Lakh mark, he loses the flat 100% rebate, but he is eligible for “Marginal Relief.”

• Tax Calculation:
  • Up to ₹4,00,000: Nil
  • ₹4,00,001 to ₹8,00,000 (at 5%): ₹20,000
  • ₹8,00,001 to ₹12,00,000 (at 10%): ₹40,000
  • ₹12,00,001 to ₹12,10,000 (at 15%): ₹1,500
  • Total Tax Payable: ₹61,500
• Marginal Relief u/s 156(2)(b): Mr. B’s income exceeds the ₹12,00,000 threshold by exactly ₹10,000. However, his tax payable (₹61,500) is significantly higher than the extra income he earned above the threshold. To prevent this unfairness, the law provides a rebate equal to the amount by which his tax exceeds his extra income.
• Rebate Calculation: ₹61,500 (Tax) – ₹10,000 (Excess Income over 12 Lakhs) = ₹51,500 (Rebate amount).
• Final Tax Liability: ₹61,500 – ₹51,500 = ₹10,000. (This essentially means his entire extra ₹10,000 is taken as tax, but he isn’t penalized beyond that).

Example 3: Under the Old Tax Regime

Suppose Mrs. C opts out of the new tax regime and chooses the old tax regime, and her total taxable income is ₹4,50,000.

• Rebate u/s 156(1): Under the old regime provisions, a resident individual is entitled to a 100% rebate of the tax payable or ₹12,500, whichever is less, strictly provided their total income does not exceed ₹5,00,000.
• Final Tax Liability: Assuming her calculated tax under the old regime rules comes out to ₹10,000, she will receive the full ₹10,000 rebate under Section 156(1), bringing her final tax payable to ₹0.

Related Post

Section 156 Income Tax Act 2025 Rebate of income-tax in case of certain individuals.

Section 202 Income Tax Act 2025 New tax regime for individuals, Hindu undivided family and others.

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Salient Features of Tax Rebate under section 87A of Income Tax Act

• Tax Rebate under section 87A of Income Tax Act is available to Individuals having total income is less than Rs 5 Lakh. Total Income Means =[Gross Total Income Less Deductions u/s ( e.g LIC PPF etc ) ]
• Tax Rebate under section 87A of Income Tax Act is available only to Resident Individuals ( i.e the Individuals who stay in India for more than 182 days during the relevant previous years). Thus this Rebate is not available to Non Resident Individuals or HUF’s / partnership firms etc.
• Tax Rebate under section 87A of Income Tax Act is available to Individuals having total income is less than Rs 5 Lakh even if return is filed after due date /belated return.
• Tax Rebate under section 87A of Income Tax Act is available whether Individual is Men or Women.
• Tax Rebate under section 87A of Income Tax Act is allowed before levy of Education Cess, SHE Cess & Surcharge.
• Tax Rebate under section 87A of Income Tax Act is available from  assessment year 2014-15 and subsequent assessment years.
• Amount of Tax Rebate under section 87A of Income Tax Act is as follow

• Financial Year	Assessment Year	Maximum Rebate Allowed (Rs)
  2013-14	2014-15	2000
  2014-15	2015-16	2000
  2015-16	2016-17	2000
  2016-17	2017-18	5000

• Read Income tax rebate under Section 87A w.e.f AY 2018-19

• Amount of Tax Rebate under section 87A of Income Tax Act in different situations for AY 2016-17 if the Income of the Individual is Less than Rs 500000 is as follow

• Financial Year	Assessment Year	Maximum Rebate Allowed (Rs)	Suppose Tax Payable is	Actual Rebate u/s 87A to be allowed
  2015-16	2016-17	2000	1000	1000
  2015-16	2016-17	2000	1500	1500
  2015-16	2016-17	2000	4000	2000

• Sometimes in case of Salaried employees, Employer dont give you the benefit  of Tax Rebate under section 87A of Income Tax Act in Form No 16. In that case you have to claim this tax rebate while filing your income tax return.

Example for better understanding of Tax Rebate u/s 87A

1. Illustration for better understanding

Mr. Raja (age 35 and resident in India) is a salaried employee. His taxable salary for the year 2016-17 amounted to Rs. 5,84,000. He has deposited Rs. 94,000 in public provident fund untitled for deduction under section 80C. The employer has deducted tax of Rs. 19,570 from his salary. What will be his tax liability for the year?

**

(*) The tax rates for the financial year 2015-16 applicable to an individual below the age of 60 years are as follows :

• Nil upto income of Rs. 2,50,000
• 10% for income above Rs. 2,50,000 but upto Rs. 5,00,000
• 20% for income above Rs. 5,00,000 but upto Rs. 10,00,000
• 30% for income above Rs. 10,00,000.Apart from above, education cess @ 2% and secondary and higher education cess @ 1% will be levied on the amount of income-tax. Applying the above normal tax rates, tax on income (before cess) will come to Rs. 24,000.(**) Rebate under section 87A will be Rs. 2,000, being lower of following :(a) Tax on total income, i.e., Rs. 24,000; or

  (b) Rs. 2​,000

  ($) Surcharge is levied @ 15% on the amount of income-tax where the total income of the taxpayer exceeds Rs. 1 crore. In this case, the total income is below Rs. 1 crore and, hence, no surcharge will be levied.

  2. Illustration for better understanding

  Mr. Kapoor (age 35 years and resident in India) is running a medical store. Taxable business income for the year amounted to Rs. 5,84,000. He does not have any other income. He deposited Rs. 50,000 in public provident fund. Can he claim rebate under section 87A?

  **

  Rebate under section 87A is available to an individual who is resident in India and whose total income does not exceed Rs. 5,00,000. In this case, the gross total income of Mr. Kapoor is Rs. 5,84,000 and he has deposited Rs. 50,000 in PPF and, hence, total income i.e.taxable income will come to Rs. 5,34,000 (Rs. 5,84,000 less Rs. 50,000). Rebate under section 87A is available only if the total income does not exceed Rs. 5,00,000. In this case, the total income exceeds Rs. 5,00,000 and, hence, he cannot claim rebate under section 87

3. Illustration for better understanding

Mr A has Total income including arrears Rs.572710. Total income excluding arrears Rs. 460910. Mr A  has apportioned arrears in respective financial year and got relief under section 89(i) . Is Mr A eligible for tax rebate u/s 87A of Rs. 2000/ as his total income related to this financial year is less than 5 lac.

No Mr A is not eligible for rebate u/s 87A, becasuse Tax rebate u/s 87A is calculated  on Total Income after Deductions but before giving effect of relief u/s 89 i.e., ceiling limit for 87A includes income + arrears which in case of Mr A exceeds ₹5 lacs.

4. Illustration for better understanding

Mr A total income excluding agricultural income 350000/- & agricultural income 250000/-. Can  he get Tax Rebate u/s 87A

As per Sec 87A Total Income should be below or equal to Rs. 500000 and as Mr A’s  Total Income is Rs. 500000 he will get benefit of Sec 87A

Purpose of Tax Rebate under section 87A of Income Tax Act

With a view to provide tax relief to the individual tax payers who are in lower income bracket, a tax rebate has been provided to an assessee, being an individual resident in India and having total income not exceeding five lakh rupees.

Tax Rebate under section 87A of Income Tax Act 1961 was inserted by Finance Act 2013 w.e.f 01.04.2014. Section 87A is as follow :-

Rebate of income-tax in case of certain individuals.

87A. An assessee, being an individual resident in India, whose total income does not exceed five hundred thousand rupees, shall be entitled to a deduction, from the amount of income-tax (as computed before allowing the deductions under this Chapter) on his total income with which he is chargeable for any assessment year, of an amount equal to hundred per cent of such income-tax or an amount of *two thousand rupees , whichever is less.

[ * Word “five” shall be substituted for “two” by the Finance Act, 2016, w.e.f. 1-4-2017.]

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