What Is Tax Rebate, Increased to INR 12 Lakh in Budget? How Many Types of Income Tax Rebates Are Available? Check Details

Mumbai, February 1: Finance Minister Nirmala Sitharaman presented her eighth consecutive Union Budget today, February 1, in the Parliament. While announcing the budget for fiscal year 2025-2026, Nirmala Sitharaman introduced new income tax rebates. She also announced major income tax relief and said that there would be no tax payable on income up to INR 12 lakh. With this, the new tax regime (NTR) will become simper with a special focus on the middle class. Having said that, the income tax rebates introduced in today's Union Budget have become the talk of the town.

What Is Tax Rebate?

So, what is a tax rebate? How many types of tax rebates are available? Let's know more; as Nirmala Sitharaman said, income tax slabs and rates are being revised across the board to create a more progressive taxation system. In simple terms, a tax rebate can be understood as receiving cashback on one's taxes. Tax rebate reduces an individual's overall tax liability, which means one either pays less tax or gets a refund if the person has already paid more than they owe. Tax rebate can also be understood to be a reward for meeting certain criteria set by the government, such as earning below a certain threshold or investing in eligible schemes. New Income Tax Slabs Announced in Budget 2025: How To Calculate Income Tax As per Revised Tax Rates if Your Salary Is Below or Above INR 12 Lakh.

Notably, tax rebates were introduced to encourage taxpayers to invest and save more. It must be noted that the income tax rebate has been raised from the previous INR 7 lakh to INR 12 lakh under the new tax regime. This means that an individual with an income of up to INR 12 lakh will have zero tax liability. However, the rebate is only applicable to those earning up to INR 12 lakh. If an individual's taxable income is even a rupee more than INR 12 lakh, then the person has to pay taxes as per the slab rates under the new tax regime. It must be noted that the Section 87A rebate has been increased to INR 60,000.

Types of Income Tax Rebates

There are several types of tax rebates under which individuals can claim a refund or relief. These include Sections 80C, 80D, 80EE, 80TTA, 80G, 54, 54EC, 24b, 80CCG, 10(13A), 80GGA, 24a, 10(5), 80DD, 80GGC, 80E, 80DDB, 80GG, 80U, 54F, 10(10D) and 80CCF. The Income Tax Act provides for several types of tax rebates. While most tax rebates under sections 80C and 80D relate to investment and expenses, other rebates are also available for specific transactions and even incomes. Section 80EE allows taxpayers to avail tax rebates on the interest payment of a loan, while Section 80GGA allows salaried individuals making donations to institutions involved in scientific activities, rural development, conserving nature, etc., to claim tax benefits. How New Income Tax Slabs and Rates, Announced in Budget 2025, Are Different From Current Income Tax Slabs and Rates Under Old and New Regimes.

Most salaried individuals prefer Section 80C as it significantly lowers the taxpayer's taxable income, as a person can claim rebates on investments such as the Employee Provident Fund (EPF), Public Provident Fund (PPF), tax-saving fixed deposits, etc. Section 80D allows tax rebates for payments made for health insurance policies, while 80G allows rebates if an individual makes a donation to charitable organisations.

(The above story first appeared on LatestLY on Feb 01, 2025 05:29 PM IST. For more news and updates on politics, world, sports, entertainment and lifestyle, log on to our website latestly.com).