Income Tax Rebate: Eligibility And Types Of Tax Rebates In India

Income Tax

When the direct tax that you pay is more than your tax liability, you receive a refund, which is known as income tax rebate. This refund is available to you after the end of every fiscal year. However, to obtain tax rebates, you have to file your income tax returns religiously and on time. 

The Income Tax Department introduced tax rebates under Section 87A of the Income Tax Act so that no Indian citizen pays more than what they owe. Owing to this refund, a taxpayer can end up saving anywhere between Rs 12,500 and Rs 1.5 lakh annually. 

So, if you are looking to reduce your income tax liability, keep reading to learn more about claiming tax rebates. 

How to Obtain an Income Tax Rebate in India?

To avail income tax rebate, you can approach your respective HR. They will do the exemptions and make deductions directly at the source. However, deductions that do not occur at the source need to take place while filing your tax returns. 

What Are the Eligibility Criteria to Claim Tax Rebates?

In order to claim a tax rebate, it is mandatory for all taxpayers to meet the following eligibility criteria: 

• A taxpayer has to be an Indian resident 
• You must have a gross annual income of less than Rs. 5 lakh to avail tax rebate under Section 87A of the Income Tax Act.
• If your gross income is more than Rs. 5 lakh, you can obtain tax deductions under Section 80C, 80D, 80EE, 80TTA, 80G, etc. 

Also Read: Home Loan Tax Benefits

Types of Income Tax Rebates in India

The following are the sections under which you can obtain income tax rebate in India:

• Section 87A

If a resident and taxpayer’s gross income, after deduction, is less than Rs. 5 lakh, the individual can claim tax relief. The maximum amount available as rebate is Rs. 12,500. This refundable amount is given before adding a 4% cess. 

• Section 80C

Under Section 80C of the Income Tax Act, you can claim a deduction of up to Rs. 1.5 lakh. Here are some of the investments and expenses that fall under this category:

• ELSS
• NSC, PPF, SCSS
• Employees’ Provident Fund
• Life insurance premium
• Post Office savings deposits of 5 years 
• Principal amount on home loan
• Tuition fees
• Registration and stamp duty on the purchase of a house 
• Pension fund
• Section 80CCC

Any contribution made to the annuity pension plan offered by any life insurance provider qualifies for a tax deduction of up to Rs. 1.5 Lakh. 

• Section 80D

Under Section 80D of the Income Tax Act, you can get a deduction on your health insurance premium. For yourself, your spouse and dependents, you can claim a deduction of Rs. 25,000. 

Additionally, if your parents are less than 60 years old, a deduction of up to Rs. 25,000 is also available for them. If the parents are above 60, the deductible amount is Rs. 50,000. However, if both, the taxpayer and parents, are above 60, you can claim a maximum deduction of Rs. 1 lakh. 

• Section 80DDB

This section applies to any expenses incurred while treating a specified disease or ailment. 

• Individuals and Hindu Undivided Families below 60 years: Maximum deduction of Rs. 40,000 for an individual or any member of the HUF
• Individuals and HUFs above 60: Maximum deduction of Rs. 1 lakh for senior citizens, super senior citizens, or family member
• Section 80E

If you take an education loan to fund higher studies, the interest on this loan qualifies for a deduction. The loan might be taken by you, your spouse, your children or anyone for whom you are a legal guardian. 

The maximum duration to claim deduction under Section 80E of the Income Tax Act is 8 years. Plus, there is no limit with regard to the interest amount for which you can claim a deduction. 

• Section 24B

Under this Section, you can avail a maximum tax deduction of Rs. 2 lakh on repayment of a home loan. The interest amount repaid during a financial year can be claimed as a deduction. 

• Section 80EE

If you take a home loan of up to Rs. 35 Lakh, you can claim an additional deduction of Rs. 50,000 on the loan interest. However, you need to be a first-time homeowner, and the house cannot cost more than Rs. 50 Lakh. On top of this, the loan must be taken during the current fiscal year. 

The deduction of Rs, 50,000 is available on top of the above-mentioned deduction under Section 24 of the Income Tax Act. 

• Section 80G

If you make contributions for a social cause to recognised charitable institutions, you can claim 100% or 50% deduction. However, if you make donations above Rs. 2,000 in cash, they will not qualify for tax deductions. 

You can find the list of contributions that qualify for 100% or 50% deduction with or without a qualifying limit on the Income Tax Department’s official website. 

• Section 10(13A)

This Section applies to all taxpayers who receive House Rent Allowance from their employers. The deductible amount is the least of the following:

• Actual HRA provided by an employer
• Actual rent less 10% of total salary
• 40% salary (50% in metro cities)

If your rent is less than 10% of your salary, then you receive no refund.

• Section 80GG

Under this Section, you can enjoy a deduction on the house rent amount when you do not receive HRA. However, it does not apply to individuals who do not pay house rent and live in a self-occupied residential house. 

The deductible amount is the least of the following:

• 25% of adjusted gross income
• Actual rent minus 10% of total salary
• Rs 5,000 per month
• Section 80TTA

Individuals or Hindu Undivided Families can claim a deduction of Rs. 10,000 on the interest earned on savings account deposits. However, this Section does not apply to interest received from fixed or recurring deposits. 

• Section 80U

Any Indian resident who faces physical or mental disabilities can obtain a deduction of Rs. 75,000. In severe cases, this refundable amount can also be Rs. 1,25,000. However, one needs to provide their disability certificate while filing ITRs. 

Also Read: How To File Income Tax Return For Mutual Funds On New Tax Portal?

Final Word

The Income Tax Department offers various tax deductions to reduce the tax liability of Indian taxpayers. Along with this, these deductions give incentives to individuals to indulge in investments and take loans that carry tax benefits. You can find the full list of all deductions available under the Income Tax Act on the online portal of the Income Tax Department. 

Frequently Asked Questions

1. If I make a donation under my company name, can I claim a tax deduction?

Yes, Section 80G of the Income Tax Act applies to every taxpayer in India. Thus, even if you are donating to a charitable organisation under the name of your company, you can claim 100% or 50% tax deduction. 

2. How much tax rebate can I get on my home loan?

One of the primary benefits of a home loan is the tax benefit that it carries. Under Section 80C and Section 24 of the Income Tax Act, you can claim deductions of Rs. 1.5 lakh on principal repayment and Rs. 2 lakh on the interest during a financial year. 

3. When was Section 87A of the Income Tax Act introduced?

Section 87A of the Income Tax Act was introduced in 2013 to allow Indian residents to obtain tax rebate. It was also recently updated in 2019. Owing to this provision, individuals earning up to Rs. 5 lakh annually do not have to pay income tax. 

4. How long does it take to get a tax refund?

Generally, after the CPC department of income tax processes ITR, it takes 20 to 45 days to issue the refund. However, if you file your income tax returns close to the deadline, it might take longer to receive this refund. 

5. Can I get tax refunds from 3 years ago?

Normally, It is required that you claim tax rebate each year when they are applicable. However, if you fail to do so, you can send an application to the income tax commissioner. Depending on terms and conditions, you can claim refunds for up to the last six years.

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This article has been prepared on the basis of internal data, publicly available information and other sources believed to be reliable. The information contained in this article is for general purposes only and not a complete disclosure of every material fact. It should not be construed as investment advice to any party. The article does not warrant the completeness or accuracy of the information, and disclaims all liabilities, losses and damages arising out of the use of this information. Readers shall be fully liable/responsible for any decision taken on the basis of this article.