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Income Tax Rebate - How to Get a Tax Rebate in India?

Maximise your tax savings with rebates under Sections 80C, 80D & 87A. Understand how to reduce tax liability and file returns the right way.

Written by : Knowledge Centre Team

2026-02-10

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8 minutes read

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Taxes are a universal financial obligation that impacts every individual and household. Usually, you end up paying taxes directly and indirectly. While you may not have much of a say in the indirect taxes as they are based on the money you spend, you can use tax rebates for direct taxes.

As income tax rebate allows you to reduce your direct tax liability legally and without hiding your income. Most tax rebates are linked to expenses that are essential in life or aligned with long-term financial investments.

This article explains the tax rebate meaning, what is tax rebate in India, how rebate in income tax works, and how rebates and reliefs help reduce overall tax liability.

Key Takeaways
 

  • Tax rebates help reduce the total tax liability, making them beneficial for taxpayers
  • Various sections under the Income Tax Act provide rebates based on income level, investments, and expenses
  • Choosing between the old and new tax regimes impacts the availability of rebates
  • Proper documentation and timely filing of income tax returns are crucial to claiming rebates

What is Income Tax Rebate?

The rebate meaning in tax refers to a reduction or refund in the total tax payable. In simple terms, the rebate meaning in income tax is the amount refunded or adjusted when the tax paid is higher than the actual tax liability. For example, if your tax liability is amounts to ₹20,000, but if the bank pays the Government a TDS that amounts to ₹30,000 on your behalf, you are eligible for a tax rebate.

In other words, you will avail a refund on tax money at the end of every financial year if your tax liability is less than that of the amount paid by you. You need to file an Income Tax Rebate within a specified period if you want to claim the income tax refund.

Fortunately, the Indian Income Tax Act is full of options for you to save much of your income from tax. You can use the various tax rebates available in the act to reduce your annual direct tax liability. The only condition for claiming the income tax rebate is that you file the income tax return religiously. Since the income tax rate in this country is progressive, higher-income attracts direct tax at higher rates.

Thus, based on your rate of taxation, you can save anywhere between ₹12,500 to ₹1.25 Lakhs using the income tax rebates. Most of the transactions eligible for tax rebates are investments for long-term goals, financial safety for the family in emergencies or necessary education or home expenses.

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Eligibility to Claim Tax Rebate in India

The only way to get an income tax rebate is through filing an ITR at the end of the fiscal year.

Although, there can be a few cases:

  • If your gross income is less than ₹5 Lakhs, then in that case, filing an ITR will be useful.
  • But, if your gross income is more than ₹5 Lakhs, then you will have to take the help of a tax deduction system that comes under Section 80C, Section 80D, 80CCD, etc., to reduce your taxable income.
  • People with a gross income of up to ₹5 Lakhs need to know that they are also eligible for a full tax rebate.

How to Claim an Income Tax Rebate?

This section explains how to apply for tax relief and how to claim a rebate in income tax while filing ITR. Here is a detailed step-by-step guide to claim an income tax rebate.

  • Check Eligibility- Before claiming a rebate, ensure that you meet the eligibility criteria. For instance, Section 87A provides a rebate for individuals with a taxable income of up to ₹5 Lakhs. Eligibility varies based on the rebate section being claimed.
  • Calculate Taxable Income- Compute your total taxable income after accounting for deductions and exemptions. This helps in determining whether you qualify for a rebate and how much rebate you can claim.
  • Identify the Relevant Rebate Section- Different rebates apply based on income type and tax-saving investments. Identify which section under the Income Tax Act applies to your situation, such as Section 80C for investments or Section 80D for health insurance.
  • Gather Necessary Documents- To claim rebates, collect relevant documents like salary slips, Form 16, investment proofs, and premium receipts for insurance policies. Proper documentation ensures smooth processing and avoids tax scrutiny.
  • File Your Income Tax Return- Rebates can only be claimed when filing your Income Tax Return (ITR). Ensure that the correct rebate section is mentioned and that Form 10E is submitted where required. File your return before the due date to avoid penalties.

How to Calculate Income Tax Rebate?

To calculate your taxable income, add all sources of income (such as salary, interest, and other earnings) and subtract eligible deductions like those under Sections 80C, 80D, and other applicable provisions (if opting for the old tax regime).

Rebate under Section 87A:

  • Old Tax Regime:If your total taxable income does not exceed ₹5,00,000, you are eligible for a rebate of up to ₹12,500, effectively reducing your income tax liability to zero.
  • New Tax Regime: If your total taxable income does not exceed ₹12,00,000, you can claim a rebate of up to ₹60,000, which can reduce your tax liability to nil (subject to applicable conditions).

If your taxable income exceeds the prescribed limit under the chosen regime, you will not be eligible for the rebate under Section 87A. However, you may still reduce your overall tax liability by claiming eligible deductions (under the old regime) or through correct tax computation. Any excess tax paid will be refunded while filing your return.

Let’s understand how the rebate works using two taxpayers- Raju and Shyam- under the Old Tax Regime.

Assumptions:

  • Financial Year: current applicable year
  • Tax regime chosen: Old Tax Regime
  • Standard slab rates apply
  • Health & Education Cess @ 4%

Income Details

ParticularsRajuShyam

Annual Salary

₹6,00,000

₹10,00,000

Deductions Claimed (80C, 80D, etc.)

₹1,00,000

₹1,50,000

Taxable Income

₹5,00,000

₹8,50,000

 

Tax Calculation

 

Raju:

  • Tax on ₹2.5-₹5 lakh @ 5% = ₹12,500

  • Eligible for rebate u/s 87A (income ≤ ₹5 lakh) = ₹12,500

  • Net tax payable = ₹0

 

Shyam:

  • Tax on ₹2.5-₹5 lakh @ 5% = ₹12,500

  • Tax on ₹5-₹8.5 lakh @ 20% = ₹70,000

  • Total tax before cess = ₹82,500

  • Health & Education Cess @ 4% = ₹3,300

  • Total tax payable = ₹85,800

  • Not eligible for rebate u/s 87A (income > ₹5 lakh)

 

Refund Scenario:

Assume both taxpayers paid advance/self-assessment tax without knowing the exact deductions:

ParticularsRajuShyam

Tax Paid

₹5,000

₹1,00,000

Actual Tax Liability

₹0

₹85,800

Tax Refund

₹5,000

₹14,200

 

  • Taxpayers with taxable income up to ₹5 Lakh (old regime) can reduce their tax liability to zero using the Section 87A rebate.
  • Those earning more are not eligible for the rebate but may still receive a refund if excess tax has been paid.
  • Correct calculation of income and deductions is essential to avoid overpaying tax.
trivia-img

Did You Know?

If your taxable income is up to ₹5 Lakh, you can claim a rebate of up to ₹12,500 under Section 87A, meaning zero tax under the old regime.

 

Source: Income Tax India

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Types of Tax Rebates in India

The Income Tax Act provides multiple rebates and reliefs in income tax across different sections, depending on investments, expenses, and income classification. While most under sections 80C and 80D relate to investment and expenses, other rebates are also available for specific transactions and even incomes:

  • Investments in PPF, ELSS, and LIC - Section 80C: Section 80C allows a deduction of up to ₹1.5 Lakhs on specific investments like the Public Provident Fund (PPF), Equity Linked Savings Scheme (ELSS), Life Insurance Premium (LIC), and Employee Provident Fund (EPF). This is one of the most commonly used tax-saving options.
  • Health Insurance Premiums - Section 80D: Under Section 80D, taxpayers can claim a rebate on health insurance premiums paid for themselves, their spouses, children, and parents. The maximum deduction available is ₹25,000, which increases to ₹75,000 for senior citizens.
  • Interest on Education Loan - Section 80EE: Section 80EE provides an additional deduction on interest paid on home loans for first-time homebuyers, subject to specific conditions. The maximum deduction available under this section is ₹50,000 per financial year, over and above the deduction available under Section 24(b).
    1. Eligibility under Section 80EE:
      • The home loan must have been sanctioned between 1 April 2016 and 31 March 2017
      • The loan amount should not exceed ₹35 lakh
      • The value of the residential property should not exceed ₹50 lakh
      • The taxpayer should not own any other residential property at the time of loan sanction

        In addition, Section 80EEA was introduced to support affordable housing and allows a higher deduction of up to ₹1.5 lakh on home loan interest, subject to conditions.
    2. Eligibility under Section 80EEA:
      • The home loan must have been sanctioned between 1 April 2019 and 31 March 2022
      • The stamp duty value of the residential property should not exceed ₹45 lakh
      • The taxpayer should not own any other residential property at the time of loan sanction
      • This deduction is available only if Section 80EE is not claimed
      • Both deductions are governed by the provisions of the Income Tax Act and are subject to applicable terms and conditions.
  • Deduction for Scientific Research - Section 80GGA: Section 80GGA allows a 100% tax deduction for donations made towards approved scientific research or rural development institutions, subject to prescribed conditions. This deduction is available to taxpayers not having income under the head “Profits and Gains of Business or Profession.”
    1. Eligibility under Section 80GGA:
      • The donation must be made to an approved scientific research association or rural development institution
      • Cash donations exceeding ₹2,000 are not eligible for deduction and must be made through non-cash modes such as cheque, draft, or electronic transfer
      • The deduction is allowed only if the donor does not have business or professional income
  • Savings Bank Interest - Section 80TTA: A deduction that you can avail for the interest on deposits payable in your savings account. This income tax deduction can be claimed by an individual as well as in an HUF for up to ₹Rs 10,000
    1. Eligibility: 
      • Income must be earned via a savings account only (time deposits are not valid)
  • Capital Gains Rebate - Section 54: This section relates to profit on the sale of property that you use for residence. The whole of the capital gain can be exempt if it is fully utilised.
    1. Eligibility:
      • To be eligible, you must purchase another residential property, 1 year before or 2 years after you sell the property. 
      • There is a lock-in period of 3 years. That is, you can avail an exemption if you have held the property for at least 3 years.
  • Long - Term Capital Gains Rebate - Section 54 EC: If you invest the capital gain made through the sale of land, buildings etc in certain bonds, then you can avail an exemption.
    1. Eligibility:
      • The maximum investment in bonds must not be more than ₹Rs 50 lakhs in a financial year. 
      • You should invest the capital gain in bonds within 6 months of selling. 
      • Bonds must be long-term, that is, redeemable after at least 3 years

        The bonds in which you can invest:
        • NHAI
        •  RECL
        •  Central Govt Bonds 
  • Home Loan Interest Payment - Section 24B: Section 24(b) allows a deduction on the interest paid on a home loan taken for the purchase, construction, repair, renewal, or reconstruction of a residential property.

For a self-occupied property, the maximum deduction allowed is ₹2 lakh per financial year, subject to prescribed conditions.

  1. Key conditions under Section 24(b):
    • The home loan must be taken for the purchase or construction of a residential property
    • The construction or acquisition of the property should be completed within five years from the end of the financial year in which the loan was taken, to claim the full ₹2 lakh deduction
    • If the above condition is not met, the deduction may be restricted to ₹30,000 per year

      For let-out or deemed let-out properties, the entire interest paid on the home loan is allowed as a deduction. However, the set-off of loss under the head “Income from House Property” is subject to applicable limits as prescribed under the Income Tax Act.
  • House Rent Allowance Exemption - Section 10(13A): This section is related to the house rent allowance or HRA. It is given by the employer so that the employee can meet their rent expenses.
    1. HRA is exempt from the minimum of the following:
      • Actual HRA received by you
      • Rent paid over 10% of salary
      • 50% of the salary in metros and 40% for other cities

        No HRA is included if no rent is paid and the employee lives in his own house.

        For every citizen of India, it is advisable to pay income tax before its due date. Failing to do so would lead to several consequences, such as heavy fines and imprisonment under the IT Act. Besides, for those who are planning to buy tax saving plan online, you can choose to go with our plans for better options.

Old Tax Regime vs. New Tax Regime: Which Offers Better Rebates?

Taxpayers must also review the new tax slab for AY 2026-27 before deciding which regime provides better rebates or benefits. Choosing between the old and new tax regimes can significantly impact your tax savings. Let’s compare both to understand which one offers better rebates for you.

Advantages of the New Tax Regime:

  • Lower tax rates compared to the old regime.

  • Simpler tax structure with fewer compliances.

  • No need to invest in specific instruments for tax benefits.

Disadvantages of the New Tax Regime:

  • No major rebates or deductions are available, such as Section 80C and 80D.

  • Limited scope for tax savings through investments.

  • This might result in higher tax liability for individuals who rely on deductions.

Key Rebates Under the Old Tax Regime:

  • Section 80C for investments.

  • Section 80D for health insurance.

  • Section 24(b) for home loan interest.

  • Section 87A for income up to ₹5 Lakh.

Key Points to Remember While Claiming Tax Rebates

  • Ensure that you choose the correct tax regime before filing ITR.
  • Maintain all investment and expenditure proof to support your rebate claims.
  • Verify the correct sections while filing tax returns to avoid rejection or penalties.
  • File ITR before the deadline to ensure smooth processing of tax rebates.
  • Keep supporting documents ready when claiming rebates and reliefs to avoid discrepancies during assessment.

Difference Between Tax Deduction and Tax Exemption

Tax deduction and tax exemption are often used interchangeably, but they serve different purposes in reducing your taxable income. 

What is a Tax Deduction?

A tax deduction reduces taxable income based on eligible expenses or investments. For example, deductions under Sections 80C and 80D lower the total income before tax computation.

What is Tax Exemption?

A tax exemption allows certain types of income to be completely free from tax. For example, agricultural income and PPF interest earnings are exempt from taxation.

Conclusion

Understanding the tax rebate meaning and how the rebate in income tax works can help taxpayers optimise their tax liability and financial planning. While the new tax regime offers lower rates, the old regime provides better rebates and deductions. Taxpayers should evaluate both options carefully, maintain necessary documentation, and file returns on time to maximise benefits.

Glossary

  1. Tax Rebate: A partial refund in the amount of tax you owe, based on eligibility criteria
  2. Section 80C: A provision that allows deductions up to ₹1.5 lakh annually for certain investments
  3. Section 80D: Provides tax deductions on health insurance premiums paid for self, spouse, children, and parents
  4. Tax Deduction: An amount subtracted from your gross income to reduce taxable income based on eligible expenses or investments
  5. Tax Exemption: Income that is completely excluded from taxation, such as agricultural income or PPF interest
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FAQs

The 87A rebate is a tax rebate available to eligible resident individual taxpayers whose taxable income does not exceed the threshold limit prescribed for that financial year. Under Section 87A, the rebate meaning in income tax is that the taxpayer’s total tax payable is reduced, up to the rebate limit, resulting in reduced or zero tax liability, depending on income and the tax regime chosen.

A tax rebate reduces the final tax payable after tax calculation, whereas tax reliefs such as deductions and exemptions reduce the taxable income before tax is computed. In simple terms, rebates and reliefs work at different stages, deductions lower income, exemptions exclude specific income, and a rebate in income tax adjusts or refunds a portion of tax already computed.

Yes, here is a simple tax rebate example.
If a taxpayer’s taxable income falls within the eligible limit for Section 87A rebate, and their calculated tax comes to ₹12,500, the rebate adjusts this amount, meaning their final tax payable becomes zero, subject to applicable rules and income criteria.

To apply for tax relief or rebate in income tax, the taxpayer must:

  • choose the applicable tax regime

  • claim eligible deductions, exemptions, rebates and reliefs

  • compute total taxable income

  • file their Income Tax Return (ITR) correctly

  • ensure supporting documents are available

Tax rebates such as the Section 87A rebate can be claimed only while filing the ITR, and eligibility depends on income level and tax provisions for that assessment year.

This process is effectively how to apply for tax relief under the income tax rules.

Disclaimer - This article is issued in the general public interest and meant for general information purposes only. The views expressed in this blog are solely those of the writer and do not necessarily reflect the official policy or position of Canara HSBC Life Insurance Company Limited or any affiliated entity. We make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability, or availability with respect to the blog or the information, products, services, or related graphics contained in the blog for any purpose. Any reliance you place on such information is therefore strictly at your own risk. You should consult with a qualified professional regarding your specific circumstances before taking any action based on the content provided herein.

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