Tax Rebate in India

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Tax Rebate in India is allowed to those individuals whose income falls within the tax slabs that are modified every year as per the directions of the government. All information about modifications in the rebate structure is announced in the union budget of the respective year.

Tax Rebates in India Facts and its Rates

The current Union Budget provides for tax rebates to each and every individual who is subjected to the payment of taxes in India, even those individuals whose income is more than Rs.500,000. However if the income exceeds Rs 5 Lakh then the benefit of Rs 2,000 tax credit will not be allowed. The earlier version of Section 88 of the Income Tax Act, 1961 did not allow any tax rebate to such individuals.

Section 88 serves to abolish all tax rebates in India with regard to income from interests. The Union Budget provides tax rebates on a number of issues like rebate on the payment of premium on a medical insurance, or spending on the medical treatment of the tax payer or his family member, on the interest amount of a housing loan in case the specific house is used by the tax payer for residential purposes.

Tax Rebate in India on Funds

Section 10(33) of the Income Tax Act, 1961 has provided for complete exemptions to all individuals who have invested in mutual funds. Even the individuals who have invested in equity funds are allowed complete dividend tax exemption. This exemption however, applies to those equity fund plan that serve to invest half of the total fund amount or principal in equity. But the companies that issue such funds schemes and pay dividend thereof are subjected to the payment of tax on the dividend and the rate of interest charged on such dividend payment is 14.025%.

Tax Rebate in India for Senior Citizens

The Income Tax Act, 1961 has made provisions for tax rebates in India for male senior citizens, aged over 65 years. The Section 88B of the Income tax act, 1961 contains all details about such tax rebates. However, the most significant fact about such rebates is that the individual concerned is entitled to receive rebates till Rs. 20,000 depending upon the amount of tax payable by him.

Tax Rebate in India for Employees

Tax Rebate in India under Section 89 (1) of the Income tax Act, 1961 applies to all employees who have:
  • Received their salary in arrears
  • Received salary of more than 12 months
  • Received salary in advance
  • Opted for a share of the company profits instead of their salary

Tax Rebate in India for the year 2005-06

The Union Budget of India for the year 2005-06, provided for certain rebates on the amount of taxes as per Section 88 of the Income Tax Act, 1961. The rebates were allowed to the holders Kisan Vikas Patra, Public Provident Fund, certain insurance schemes etc. In case the income received in lieu of salary was below Rs.100,000 for an individual, he was entitled to receive a rebate of 30% on the investment. This rebate was also allowed in case the investment amount covered 90% of the investor's gross total income. In case the gross total income exceeded Rs.150,000 but was less than Rs.500,000, the investor was allowed a rebate of 15% on the principal. In case the gross total income was below Rs.150,000, the investor is allowed a rebate of 20% provided the investor did not invest 90% of his gross total income.