Income Tax Rebate in India
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Updated date : 17 February 2020
What is Income Tax Rebate ?
A refund on taxes when the liability on tax is less than the tax paid by the individual is referred to as Income Tax Rebate. Taxpayers generally receive a refund on the income tax if they have made payment of tax more than they owe. At the end of the fiscal year, they will receive the refund of tax money.
In India, they can receive a refund of the extra tax paid along with the interest. In order to make claim for the income tax refund they should file their ITR within a particular period. Usually they receive tax refunds on falling of their income within the tax slab, which is modified each year according to the government’s directions.
How to avail Income Tax Rebate in India?
In order to get income tax rebate, they can come up to their HR and he will assist them with the exemption and subtract it at the source. The rebates, which cannot be subtracted at the source has to be done while they fill up the form for Income Tax Returns.
Tax Rebate Available Under Income Tax Slab
There are the following types of tax rebates available in India:
- Many of the taxpayers prefer Section 80C as this section trims down the taxable income of the taxpayer by Rs. 1 lakh.
- Hindu Undivided Families and Individuals are permitted for the rebate of tax of the following expenses and investments under Section 80C:
- PPF, NSC, SCSS
- PF, mandatory and voluntary
- Annuity or pension fund
- Life Insurance premium
- 5-year Bank Fixed Deposits
- 5-year Post Office Term Deposit
- Principle on home loan
- Tuition fee for full time education of your children
- Stamp duty and registration on purchase of home.
- 1 lakh in one year is the maximum amount that is to be deducted
- Provident fund is deducted directly from their monthly salary. So, they should keep checking before they put the PPF and ELSS under deductions
- They must make use of Section 80C of the Income Tax Act by investing on time.
As per section 80CCC, any amount paid to deposited in an annuity plan offered by LIC or any other insurance company in India qualifies a taxpayer for an income tax rebate in India. The amount paid must be towards a plan to receive a pension as per a fund under section 10(23AAB).
Any amount received as the interest earned or bonus accrued on annuity, or on surrendering the annuity is taxable in the year of receipt.
An individual who contributes or deposits to their pension account can avail the benefit of income tax rebate under section 80CCD (1). If the individual is an employee, the maximum income tax rebate in India they can avail is lesser of 10% of their salary or 10% of their gross income.
Individuals who are self-employed can avail 20% deduction out of their gross salary as per Fiscal Year 2017-18.
Note: The combined income tax rebate in India, which can be availed under sections 80C, 80CCC, and 80CCD (1) is capped at Rs. 1, 50,000.
Taxpayers can also avail an addition income tax rebate of Rs. 50, 000 under section 80CCD (1B) subject to self-contribution or deposit to their NPS account or Atal Pension Yojana.
An additional income tax rebate of 10% of the employee’s salary is allowed subject to employer’s contribution under section 80CCD (2).
If they are making payment of health insurance premium, they will receive income tax rebate u/s 80D.
They can receive deduction on taxes by presenting proof to the Human Resource department so that they can make adjustments for that amount while they apply for TDS on their pay.
If the HR department does not deduct that sum at the source, they can incorporate it while they fill up your ITR.
Income tax rebate in India is available on the interest paid on loan.
The person who qualifies for the income tax rebate in India is:
- A housing finance firm or a financial institution sanctioned the loan between April 1, 2013 and March 31, 2014.
- The amount of loan is Rs. 25 lakhs or less and price of residential house is lesser than or is Rs. 40 lakhs.
- The house that they got via home loan should be the only house, which they own at the time of sanction of loan.
Highest deduction permitted under Section 80EE is Rs. 1 lakh, which is paid towards interest.
If an individual pays Rs. 75,000 interest in the fiscal year 2013-14 and the income tax rebate remains at Rs. 25,000 can be asserted for the fiscal year 2014-15.
They can either present a proof or attestation of the payment made towards interest to the HR department and can avail deduction on their pay at the source or they can take it while their file your ITR.
Tax rebated can be availed on the interest on savings up to Rs. 10,000 from April 1, 2013 u/s 80TTA if the interest is less than the amount.
Hindu Undivided Families (HUF) and individuals who earn interest on the savings account are eligible to claim tax exemption. They can hold a savings account with co-operative society, post office or bank.
The claim for income tax rebate in India cannot be made by savings account that body of individuals, association of person or firms hold.
Individuals paying taxes can also receive tax rebates on the sum they donate to certain charitable organisations or institutions set up by the Indian government u/s 80G.
There are four categorization of the deductions depending upon the charitable institutions:
100% exemption on contribution towards:
- National Children’s Fund
- Prime Minister's National Relief Fund
- NFCH-National Foundation for Communal Harmony
- Chief Minister's Relief Fund(Maharashtra)
- NBTC-National Blood Transfusion Council or SBTC- State Blood Transfusion Council
- Prime Minister's National Relief Fund
- National Defence Fund
- Contributions towards Zila Saksharta Samitis
- Approved education institution or university of national importance
- The Africa (Public Contribution-India) Fund
- The Air Force Central Welfare Fund or the Indian Naval Benevolent Association or the Army Central Welfare Fund
50% exemption on contributions towards:
- Prime Minister's Drought Relief Fund
- Jawaharlal Nehru Memorial Fund
- The Rajiv Gandhi Foundation
- Indira Gandhi Memorial Trust
100% exemption based on the qualifying limit on the contributions made towards:
The local or government authority that endorses family planning
50% exemption contingent to qualifying limit:
- Indian authority, which is engaged in development of villages, towns and cities, housing development
- Repair work of an acquainted temple, gurudwara, church or mosque.
- Corporations promoting interests of Buddhist, Christian, Muslim, Parsi and Sikh community
- The local or government authority promoting charitable intentions other than the family planning
The taxpayer is required to present the proof of the contributions or donations to their HR and get it deducted at the source from their salary or they can present it while they file ITR.
Indian companies can avail deduction under section 80 GGB for the amount contributed to an electoral trust or any political party, provided the contribution is done by any payment mode other than cash.
The term ‘any political party’ stands for any political party that is registered under section 29A of the Representation of the People Act, while the contribution by the company is defined under section 293A of the Companies Act, 1956.
Section 87A, as per the Fiscal Year 2017-18, provides taxpayers with an income tax rebate of Rs. 2,500, provided the total income is more than Rs. 3, 50,000. This also means that if the total income of a taxpayer is above Rs. 3, 50,000 during the Fiscal Year 2017-18, then that individual cannot claim tax deduction under section 87A.
The following criterion must meet to claim a deduction:
- Total taxable income includes all the earnings under the various heads like Salary, Business/Profession, House or Property, Capital Gains, etc.
- Any losses under any heads, such as repayment of a home loan or due to any such reason, are deducted from the total income of a taxpayer.
The profit made by an individual while selling his residential property is taxable. If the person has held the possessions exceeding 3 years, it will turn into a long-term capital profit and rebate can be availed by him.
In order to qualify for a deduction, you should purchase another residential possession before 1 year of selling of the old property or within 2 years, or should have constructed a residential estate within a period of 3 years from the selling of his old property.
There is no bar for the tax exemption. The individual can avail rebate from tax if the complete capital profit has been consumed.
Taxpayer can avail tax exemption if he invests the long-term capital profit in certain bonds.
The individual can invest up to Rs. 50 lakhs in REC and NHAI bonds to make use of exemptions.
Interest Tax Shield on the home loan permits rebates on the amount of interest on home loans.
The Act will exempt up to Rs. 30,000 if taxpayer borrows for house property renewed, constructed, reconstructed, repaired or bought before April 1, 1999.
Taxpayer will qualify for exemption up to Rs. 1.5 lakhs if he borrows for property constructed or bought within a period of 3 years from borrowing provided that it is rented after April 1, 1999.
Taxpayer is eligible for income tax rebate in India up to Rs. 30,000 if he takes home loan for reconstructing; repairing or renewing the accommodation is borrowed after April 1, 1999.
The individual will be eligible for an exemption up to Rs. 30,000 if his house is bought or constructed after 3 years after he borrows the money (if he borrows money after April 1, 1999).
The taxpayer can make claim for the deduction on the home loan in same year that the interest on home loan is payable even if he does not intend to make payment for all the interest in same year.
While the individual file the Income Tax Return, he puts the exemption under the income head from his house property.
It is also known as Rajiv Gandhi Equity Savings Scheme. Any taxpayer can claim 50 percent rebate for tax on the sum invested, having an income not more than Rs. 12 lakhs makes use of DEMAT account to purchase notified shares.
The individual should be a fresh retail investor. He must make investments in shares that belong to Miniratnas, Navratnas, Maharatnas, NSE 100 and BSE 100. Investments made in shares listed above from ETFs and Mutual Funds, qualify for exemption. This tax benefit cannot be availed by NRIs.
The highest investment limit is wrapped up at Rs. 50,000.
The taxpayer can fill the details in your Income Tax Return u/s 80CCG or the details of the investment made by him can be submitted to the HR department of the company and they can deduct the tax at source on his salary.
This is applied to the individuals paying house rent allowance (HRA)
The taxpayer has to submit rental receipt to the HR Department of their respective company every fiscal year.
The limit of the maximum amount is the minimum of the actual HRA: actual lease less 10 percent of the income or 40 percent of the income and 50 percent of the income in metros.
If the lease is not more than 10 percent of the salary, then there will not be any tax rebate.
If the taxpayer’s HRA is lesser than the rent of the house, then he must speak to the HT to make HRA equivalent to the rent of the house to raise the basic pay.
Taxpayer will be required to present rental receipt to the HR so that his HR can apply lesser TDS on the salary.
Individuals earning salary can make claims to avail tax benefits if they contribute to institutions involving in rural development, scientific activities, conserving nature etc.
The limit for maximum deduction is 100 percent of the donated amount. However, the individual is not allowed any deduction on salary TDS, he has to include it at the time of filing his ITR.
Income earned from the house is considered as a separate income and is deducted from tax.
Taxpayer can receive a flat 30 percent rebate income generated from house.
Deductions for maintenance and repairs are not allowed. Let out houses are not eligible for any rebate.
Tax break can be availed on the travel allowance u/s 10(5)
Taxpayer can claim income tax rebate in India on the actual amount spent on travel costs.
The individual can claim for deductions on the leave travel allowance or the actual amount spent on travelling, whichever is lesser.
The sum spent disabled dependents’ well-being is rebated from tax.
The individual can make claim for a flat deduction of a sum of Rs. 50,000 in a year. If the dependent suffers a disability of 80 percent or more, the highest limit is Rs. 1 lakh.
The taxpayer has to present the prescribed certificate to the department of HR and they will get the deduction in TDS on his salary.
The taxpayer can claim for tax exemption on the donations he makes towards political parties. This is designed for noncorporate taxpayers.
The contributions made should be a registered political party under section 29A of the Representation of the People Act. Contributions made in the form of cash do not qualify for deduction.
The taxpayer can claim 100 percent of the amount donated for deduction.
This rebate from taxes is not permitted in salary TDS. An individual can claim this while he files his ITR.
Taxpayer can claim for exemption for the entire amount that he pays as interest on his education.
The individual has to present the bank statement stating about the payment of interest to his HR and they will apply lesser TDS on his salary. Taxpayer can claim in his ITR while he claims for his returns.
If you are undertaking any medical treatment for thalassaemia, kidney failure, cancer etc., the sum spent on these treatments can get tax exemption.
Income tax rebate in India is made available for Hindu Undivided Families (HUF) and individuals who reside in India.
Taxpayer can claim tax rebates for Rs. 40, 000 or actual expense, whichever is lesser.
The individual has to submit the necessary documents to the HR department and they will apply lesser TDS on his salary. That person can claim in his ITR form while he files his returns.
The taxpayers who do receive tax exemption on the House Rent Allowance (HRA) of their pay can receive income tax rebate for the lease that is paid by them under section 80GG.
The taxpayer can claim of the minimum of the following:
- 2,000 (monthly)
- 25% of total income
- Actual rent less 10% of total income
Rebate can be claimed while he files his income tax return forms.
A flat deduction can be claimed by a disabled person who resides in India by presenting a certificate disability.
Disabled person can claim a flat rebate of Rs. 50,000 in a year. If his disability is severe then limit is Rs. 1 lakh.
While an individual files his ITR he can claim deductions.
Capital profit produced from the sale of gold, bonds, shares, property etc., which is taxable could be claimed for exemption of the sum is used to make investment to construct or to purchase a residential property.
This is limitless. The whole capital profit can be rebated from tax. Taxpayer has to claim deduction while he files ITR.
Income that an individual receive from insurance policy is not liable for any income tax. The advantages should be from unit linked plans, whole-life plans, endowment plans, and whose bonuses and returns are free of tax.
There is no limit; any sum received is void of income tax seeing that the individual meets the conditions. He will have to assert for deduction while he files his ITR.
If an individual invests up to Rs. 20,000 in specific infrastructure bonds, then he is eligible for additional income tax rebate in India.
3 long-term infrastructure bonds that qualify are:
Infrastructure Development & Finance Corporation, IFCI and LIC
This additional discount was not extended for 20112-13. HUFs and individuals can invest in these bonds; however they cannot claim tax exemption.
Under Patent Act, 1970, a deduction of up to Rs. 3, 00,000 subject to royalty for a patent registered on or before April 1, 2003 can be availed by a resident taxpayer of India who should be the patentee. The taxpayer must produce a certificate duly signed by the issuing authority.