The Income Tax rebate is a refund on taxes when the liability of tax is less than the tax the individual has paid. In India, it is allowed to those individuals whose income falls within the Income Tax Slabs. These slab rates are modified every year as per the government rules. The information about these modifications or changes in rebate structure will be announced in Union Budget.
If you have paid more than what you owe, then you (taxpayer) will get an Income Tax Refund. That refund money is given back to you at the end of the FY (financial year). You can also get the interest for the refund of excess tax. You have to file the Income Tax Return within a specified period to claim the tax refund.
Income Tax Rebate – Overview
The Current Union Budget provides tax rebates to each and every individual in India who is subjected to the payment of taxes. It is even applicable to those individuals whose income is more than Rs. 5 lakhs. However, if the income is more than Rs. 5 Lakhs then there will be no tax credit of Rs. 2,000. The Income tax rebate to such individuals is not allowed previously, as per the earlier version of Section 88 of the Income Tax Act, 1961.
Section 88 of the IT Act, 1961 serves to abolish all tax rebates in India with regard to income from interests.
The Union Budget provides tax rebates on many issues like a rebate on the medical treatment of the taxpayer or his family member or on the payment of medical insurance premium, on the interest amount of a housing loan (in case that specific house is used for residential purposes by the taxpayer).
Tax Rebate for Senior Citizens
As per Income Tax Act, 1961, there is a provision of tax rebates for male senior citizens aged over 65 years in India. To know about such rebates refer the Section 88B given below. However, depending upon the amount of tax payable by the individual, he is entitled to receive rebates upto Rs. 20,000.
Rebate of income tax in case of individuals of 65 years and above: An assessee, being an individual resident in India, who is of the age of 65 years or more at any time during the previous year and whose gross total income does not exceed one hundred thousand rupees (1 Lakh), shall be entitled to a deduction from the amount of income-tax on his total income with which he is chargeable for any assessment year, of an amount equal to forty percent of such income-tax.
Section 88B has been omitted by the Finance Act, 2005, with effect from 1-4-2006.
Tax Rebate on Funds
As per Section 10(33) of the IT Act, 1961 all individuals who have invested in mutual funds can avail complete exemptions. Even for the one who have invested in equity funds there is a complete dividend tax exemption. However, this exemption applies to those equity fund plans that serves to invest the principal amount or half of the total fund amount in equity. But the companies that issue such funds schemes and pay dividend thereof are subjected to the tax payment on the dividend. The rate of interest charged on such dividend tax payment is 14.025%.
Tax Rebate for Employees
Under Section 89(1) of the Income tax Act, 1961 Income Tax rebate applies to all employees who have:
- Received salary of more than 12 months.
- Received their salary in arrears.
- Opted for a share of the company profits instead of their salary.
- Received salary in advance.
How to claim a Tax Rebate?
- You can claim a rebate while filing income tax return since return filing has been made mandatory. For this purpose, you must mention the bank IFSC code and your bank account number while filing the return.
- If you haven’t claimed while filing IT return, you can still get tax refund using Form 30. Sometimes you had to follow the AO (assessing officer) personally to claim a rebate.