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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