BAJAJ BROKING

Notification
No new Notification messages
One Mobikwik Systems IPO is Open!
Apply for the One Mobikwik Systems IPO through UPI in just minutes.
Open a Free Demat Account
Pay ZERO maintenance charges for the first year, get free stock picks daily, and more.
Trade Now, Pay Later with up to 4x
Never miss a good trading opportunity due to low funds with our MTF feature.
Track Market Movers Instantly
Stay updated with real-time data. Get insights at your fingertips.

Tax Rebate on Income: How Can I Receive One in India?

Listen to our Podcast: Grow your wealth and keep it secure.

0:00 / 0:00

Synopsis:

In this article, we will discuss what a tax rebate is, who is eligible for it, and why the government offers it to certain people. We will go through the different types of rebates and why they are important.Then we will compare the advantages and disadvantages in rebates. We will also cover how to calculate the tax rebate and how to apply for it.

Are you looking to maximize your savings and reduce your tax liability? Discover how you can receive a tax rebate on your income in India. In this guide, we'll break down the eligibility criteria, application process, and tips to ensure you get the most out of your tax rebate. Let's discuss who gets tax rebates in India and why.

What is the Meaning of Tax Rebate?

A tax rebate is a refund given by the government when you've paid more taxes than you owe. This usually happens when too much tax is deducted from your earnings throughout the year. When you file your tax return, the government calculates your actual tax liability. If you've overpaid, the extra amount is returned to you as a rebate, reducing your overall tax burden. 

This system ensures fairness and can provide extra funds for individuals and businesses, encouraging spending or investment in the economy.

Eligibility Criteria to Claim Income Tax Rebate

Who gets tax rebates?  It is for those whose total income is less than 5 lakhs INR in a financial year. If you belong to that category, then congrats, you are eligible for a rebate under Section 87A of the Income Tax Act. The essence of this concept is that, if you are not making that much money, and yet you paid your taxes properly, the government wishes to honor your commitment, and offer you some cashback. That’s about it!

Types of Income Tax Rebates: Explanation

Let us look into the different types of income tax rebates one by one:

1. Section 87A Rebate: This rebate is offered to any person whose income does not exceed 5 lakhs INR annually. However, there is a ceiling on how much rebate can be offered, and the limit is set at 12,500 INR.

2. Agricultural Income: If a taxpayer has any agricultural income and it is within 5,000 INR, it is not added to taxable income. If the amount is more than 5000 INR, the value above 5000 INR will be added to your total taxable income and is taxed at relevant rates.

3. Interest on Home Loan: One can get a rebate on the interest that they have paid for a home loan. The interest payment that is considered for this is limited to 2 lakhs INR under Section 24(b).

Why Tax Rebates Are Important?

Tax rebates act as a major incentive for middle class citizens to file returns and participate in the tax system. While it may seem redundant to collect taxes and then offer rebates, this encourages people to file returns and bring their income under the government supervision.

Rebates in Income Tax: Advantages and Disadvantages

Advantages:

  • More Savings: Decreases tax liability, getting more money in your pocket.

  • Encourages Compliance: Knowing there's a refund, it tends to encourage one to file taxes on time.

  • Promotes Investment: Some rebates, such as those on home loans, encourage investment in housing.

Disadvantages:

  • Complexity: The rebate is complicated to understand and hence use.

  • Limited to Certain Incomes: Not everybody is eligible, and that feels somewhat discriminatory to higher earners.

  • Policy changes: The tax laws and rebates are dynamic in nature and, hence, difficult to keep track of.

Ways to Apply for a Tax Rebate?

The procedure to get this tax rebate is pretty simple. While filing your ITR, you have to quote the rebate one is eligible for against Section 87A of the Income Tax Act. Just be sure to declare truthfully all of your income and file your ITR on time. Online portals like the e-filing website of the Income Tax Department make it easier.

How Can the Income Tax Rebate Be Calculated?

The income tax rebate is based on some simple math. Say your taxable income is 4,80,000 INR. Rebate allowable under Section 87A is 12,500 INR. Now, if your payable tax is 15,000 INR, you are going to pay only 2,500 INR after the rebate is applied. Simple enough, right?

Income Tax Rebates: Comparison of the Old and New Tax Systems

Comparing the old and new tax systems, the new regime offers lower tax rates but eliminates many exemptions and deductions, simplifying the process. The old regime retains these benefits, potentially reducing taxable income significantly. Choosing between them depends on individual financial situations and preferences for simplicity versus maximizing tax benefits. Careful evaluation of income and deductions is essential for optimal tax planning.

The Distinction Between Income Tax Exemption and Income Tax Deduction

This is where things get a little complicated. Income tax exemption essentially means that certain kinds of income are wholly free from tax, like agricultural income up to 5,000 INR. Income tax deduction means reducing your taxable income through an investment in specified schemes such as PPF or ELSS. Both will bring down your tax liability but work differently.

Which Tax Regime is Preferable?

Basically, the choice between the old and new tax regimes has to be based on individual financial situations. If you have huge investments in tax-saving instruments, then the old one can be more helpful. But if you want simplicity with lower rates, it is the new regime. Consider your income, expenditure, and investment properly before making a choice.

Conclusion

Understanding tax rebates in India can be a headache, but the trouble is worth it. Terms such as tax rebate meaning, income tax exemption, and income tax deduction may help you earn back some money. Whether you stick with the old tax regime or switch to a new one, ensure you claim every rebate you are entitled to. Who does not like extra change jingling in his pocket?

Disclaimer: Investments in the securities market are subject to market risk, read all related documents carefully before investing. This content is for educational purposes only. Securities quoted are exemplary and not recommendatory.

For All Disclaimers Click Here: https://bit.ly/3Tcsfuc

Share this article: 

Frequently Asked Questions

Can I claim tax rebate on a housing loan under Section 80C?

Answer Field

Yes, you can. Under Section 80C, for a housing loan principal repayment, you can get a tax rebate up to ₹1.5 lakh per financial year. Interest payment comes under a different section altogether. It is allowed under Section 24.

How can an NRI claim income tax rebate?

Answer Field

As an NRI, he can claim a rebate on income tax by filing his income tax return and claiming deductions under the relevant sections for investments made in India, like 80C. Make sure that you are fulfilling the eligibility criteria for claiming these deductions.

What is the 80C tax rebate?

Answer Field

Under the 80C tax rebate, exemption of ₹1.5 lakh could be made on investments and expenses like PPF, EPF, life insurance premiums, tuition fees, etc.

Can I get a tax rebate for education expenses?

Answer Field

Yes, you are entitled to a rebate on education expenses since tuition fees paid for the education of any of your children will be eligible for deduction under Section 80C up to the aggregate limit of ₹1.5 lakh.

Are there any tax rebates available for senior citizens?

Answer Field

Yes, senior citizens have higher exemption limits and can also claim additional deductions under Sections 80D (for health insurance premiums) and 80TTB (for interest income up to ₹50,000).

What investments can help me get a tax rebate?

Answer Field

Under Section 80C, you can get a tax rebate by investing in PPF, NSC, ELSS mutual funds, fixed deposits, and life insurance policies. Contributions to the NPS will also give you additional deductions under Section 80CCD.

No Result Found

Read More Blogs

Our Secure Trading Platforms

Level up your stock market experience: Download the Bajaj Broking App for effortless investing and trading

Bajaj Broking App Download

8 Lacs+ Users

icon-with-text

4.4+ App Rating

icon-with-text

4 Languages

icon-with-text

₹4700+ Cr MTF Book

icon-with-text