Under the New Income Tax Act 2025, the provisions previously covered under Section 87A have been moved and updated under Section 156.

Tax rebate under Section 156 (formerly 87A of Income tax Act 1961) is a benefit provided by the Government to reduce income tax burden. After calculating income tax on the taxable income, eligible taxpayer can reduce tax liability to certain extent as per conditions and limit specified. If rebate is equal to or more than calculated tax, tax payable becomes nil. Let’s find out more about the income tax rebate under Section 156^*.

What is Section 156?

Section 156^* of the Income Tax Act, 2025, provides a tax rebate to resident individuals whose income falls within specified limits.. The total amount of rebate varies as per the chosen income tax regime.

• Under the new tax regime, you can claim a rebate under Section 156^* of up to ₹ 60,000 for incomes up to ₹12 lakh per annum

• Under the old regime, you can claim a rebate under Section 156^* of up to ₹ 12,500 for incomes up to ₹ 5 lakh

The Section 156^* income tax rebate is applied to the total annual tax calculated before adding the 4% health and education cess.

What are the steps to claim a rebate under Section 156?

Below are the steps to claim a rebate under Section 156^*:

• Begin by calculating your gross total income for the financial year and ensure it falls within the prescribed income threshold

• Next, subtract all eligible deductions to arrive at your total taxable income

• While filing your Income Tax Return (ITR), correctly declare both your income and the deductions claimed for the financial year

• If your Taxable Income falls within the specified limit and you satisfy conditions prescribe under the section, rebate can be claimed

• If rebate is equal to or more than calculated tax, tax payable becomes nil

What are the eligibility criteria for claiming the Section 156 rebate?

Below are the eligibility criteria for claiming the rebate under Section 156^* of the Income Tax Act, 2025:

Residential status requirements

The rebate under Section 156^* is available only to resident individuals. Non-residents are not eligible to claim this benefit.

Income threshold (old regime vs new regime)

Under the new tax regime, the rebate applies if the total income is up to ₹ 12 lakh. Whereas, under the old tax regime, the income limit is ₹ 5 lakh.

Age criteria (senior/non-senior citizens)

There is no age restriction for claiming the Section 156^* rebate. Both senior citizens and non-senior citizens can avail of it, as long as the specified conditions are met.

What is the step-by-step process to claim Section 156 while filing ITR?

Below is a step-by-step process of how to claim the Section 156^* income tax rebate:

Documents required

Start by getting together all required documents. You do not need any additional documents to claim the Section 156^* rebate. You only need the standard documents used while filing your ITR, such as your Permanent Account Number (PAN), income details and information related to tax deductions.

Common mistakes to avoid

Make sure that your income and tax deductions are reported accurately so that your total income remains within the eligible threshold. Also, confirm that you file your return as a resident individual, as non-residents are not eligible for the rebate.

How does Section 156 impact overall tax planning?

Here are some ways in which the Section 156^* income tax rebate can help you with tax planning:

Combine with other deductions

Using deductions under other sections of the Income Tax Act, 2025, such as Section 123 (read with schedule XV, Sr. No. 1, 2 & 4)(Formerly covered under Section 80C of the Income Tax Act 1961)^* for investments in specified instruments or Section 126 (Formerly covered under Section 80D of the Income Tax Act 1961)^* for health insurance premiums, can help you reduce your taxable income. Lowering your taxable income can help ensure you remain within the threshold eligible for the Section 156^* rebate, which can reduce your total tax liability.

Planning for tax-free income

Careful planning of your varied income streams and eligible deductions can allow you to structure your earnings so that you fall within the Section 156^* limits. This ensures you benefit fully from the rebate while keeping your tax dues low.

Tips to reduce taxes legally

Taking advantage of all available tax deductions, exemptions and rebates within the provisions of the Income Tax Act, 2025, is a legal way to lower your tax burden. Section 156^*, when combined with other deductions, can reduce your tax liability.

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