What is a Rebate in Income Tax?

Income tax rebate is a benefit that is provided by the Government to the taxpayers by reducing the tax liability. Various financial instruments can be used by an individual to reduce the liability of the Income Tax.

Utilizing an income tax rebate serves as an effective strategy for the Government to motivate taxpayers to channel their funds into essential financial instruments, encouraging both savings and investment.

The guidelines for income tax rebates are outlined in the Income Tax Act of 1967, specifically under different sections that elaborate on the rebates offered for designated investments and savings tools.

In this article, we will discuss What is a Rebate in Income Tax, eligibility, types of tax rebate, and much more.

Eligibility for Tax Rebate

The following are the eligibility for Tax rebate-

• Income Tax rebate applies to individuals with less than Rs.5 Lakh gross income filling an ITR will be useful
• With a taxable income of more than 5 Lakhs, you’ll have to deduct your taxes which come under Section 80C, Section 80D, 80CCD, etc. to reduce the tax liability
• People with income brackets below Rs.5 Lakhs and 10 Lakhs are eligible for a full tax rebate and partial tax rebate respectively.

Types of Tax Rebate

The following are the types of tax rebates-

Section 80C

Section 80C of the Income Tax Act provides tax waivers to individuals investing their income into certain savings tools like Public Provident Funds, National Savings Certificate, Unit-linked Insurance Plans, etc. The Income Tax Deduction in section 80C is capped at Rs. 1.5 Lakhs. You can also claim a tax deduction on home loan premiums under Section 80C.

Section 80D and 80DDB

Any premium payment towards your health insurance policy is tax deductible under section 80D also, if there had been a medical expense towards you or your family, then an additional tax deduction can be claimed which will be claimed under section 80DDB.

Section 80G

Donations fall under the category of tax-deductible contributions, and you can avail of an income tax deduction under Section 80G for the amount you have donated. The maximum allowable deduction under Section 80G is Rs. 5,000/-.

80EE

A maximum deduction of Rs. 50,000 is available for deduction from your income tax if you are making interest payments on a home property that you have purchased.

80GGA

Section 80GGA pertains to the tax deduction applicable when making donations to scientific research organizations recognized by the government. You can claim 100% of the donated amount as your tax deduction.

80TTA

This deduction is available for individuals and HUF up to Rs.10,000/- for the interest on deposits payable in your savings account.

Section 54

This tax liability can be wholely claimed for the profit earned from the sale of the property but the individual must purchase another property with the capital gain to be eligible for this deduction. 

Section 54 EC

Section 54EC addresses the capital gains accrued from the sale of a property, highlighting that such gains, when invested in specified investment bonds, qualify for tax deduction. The maximum permissible investment amount is less than Rs.50 Lakhs, and the bonds must have a minimum maturity period of 3 years.

Section 24B

Loan servicing towards the payment of the home loan is covered under section 24B. The maximum deduction that you can avail for property that you occupy is Rs. 2 Lakhs.

Section 10 (13A)

An employee receiving a House Rent Allowance is considered for the deduction under Section 10 (13A). If the employee lives in his own house, then no HRA exemption is allowed.

HRA is exempt to the minimum of the following-

• Actual HRA received by you
• Rent paid over 10% of salary
• 50% of the salary in metros and 40% in other cities

How to Claim Tax Rebate in Income Tax?

You can follow these steps to claim a tax rebate while filling out the Income tax return-

• The initial step involves checking for eligibility and preparing a list of deduction categories available while filling out the Income Tax Returns.
• Following the preparation of deductions, you need to calculate the total income generated in the financial year, including income from other sources.
• Subsequently, gather all supporting documents required as proof for the deductions you intend to claim.
• With the information collected, file the Income Tax return, providing detailed information on your income, deductions, applicable rebates, etc.
• Once filed, verify and submit these details to finalize the payment of the applicable tax after deductions.
• After the payment, your tax liability for the financial year is paid and you can be worry-free

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