Section 156 of the Income Tax Act 2025

Section 156 provides a rebate to resident individual taxpayers, thereby reducing their final income tax liability. When total income does not exceed ₹5 lakh, the taxpayer can claim a deduction equal to 100% of the income tax payable or ₹12,500, whichever is lower, from the tax calculated before this rebate.

If the income is subject to taxation as provided in section 202(1), a higher rebate can be availed. When total income is up to ₹12 lakh, the taxpayer can get a rebate equal to 100% of the income tax payable or ₹60,000, whichever is lower.

However, if the income of the taxpayer exceeds ₹12 lakh, they can claim a rebate only when the income tax payable is higher than the amount by which their income exceeds ₹12 lakh.

The rebate will be calculated as the difference between the excess and the tax payable. However, the rebate under this provision is limited to the amount of income tax payable at the rates provided under section 202(1).

According to Section 156, taxpayers with an income of up to ₹12 lakh under the new tax regime can claim a rebate of up to ₹60,000, which can result in them paying zero tax. Refer to the following table that highlights the rebates under Section 156 of the Income Tax Act, 2025:

Section 156 of the Income Tax Act, 2025, replaces the earlier Section 87A of the Income Tax Act, 1961. Under Section 156, various rebates under the new as well as the old tax regime have been clearly codified in a single section. This is expected to help provide clear guidance and facilitate simplified taxation structure for individuals opting for the new income tax regime.

Section 156 is a relief-based provision in the new tax regime. Listed below are the primary purposes of Section 156 of the Income Tax Act, 2025:

• To relieve the tax burden on people from the low- and middle-income groups.
• To promote the adoption of the new tax regime.
• To eliminate the income tax burden of individual with low annual income.

Under Section 156 of the Income Tax Act 2025, the existing provisions for the old tax regime have been retained without any modifications. As per subsection (1), individuals with a total income of up to ₹5 lakh are eligible for a rebate equal to 100% of the income tax payable or ₹12,500, whichever is lower.

This effectively reduces the tax liability to zero for eligible taxpayers. There is no change in the rebate structure for individuals who continue to opt for the old tax regime.

The provisions under Section 156 of the Income Tax Act, 2025, have been clearly defined to provide a clearly structured framework to tax payers. For individuals with an income of up to ₹12 lakh, the rebate is 100% of the tax payable or ₹60,000, whichever is lower, thereby eliminating tax liability in most cases.

Where the income exceeds ₹12 lakh, marginal relief is also available under Section 156. This is designed to ensure that the total tax payable does not exceed the amount by which the taxpayer’s income for the tax year exceeds ₹12 lakh. This provision has been clearly outlined in subsection (2)(b) of Section 156.

Suppose you earn ₹12 lakh as income in a tax year. When you calculate the tax according to the applicable income tax slab rates, it comes out to be ₹60,000. Once you apply the rebate under Section 156, the entire tax amount of ₹60,000 is offset by the rebate. As a result, you reduce your final tax liability to zero.

Marginal relief under Section 156 of the Income Tax Act, 2025 that a slight increase in income does not result in a disproportionately higher tax liability. It ensures you do not pay more tax than the additional income earned beyond the threshold.

The benefits under Section 156 of the Income Tax Act, 2015, are subject to certain conditions. Check out the conditions you need to satisfy in order to claim this rebate and reduce your overall tax liability:

• The rebate can only be availed by residents Indian individual taxpayers.
• The rebate applies only to normal income taxed at applicable income tax slab rates.
• The rebate does not apply to certain income such capital gains, that is subject to tax rates other than income tax slab rates.

To claim the rebate under Section 156 of the Income Tax Act, 2025, you must meet certain requirements. Below are the key eligibility criteria that you need to meet:

• You must be a resident individual for the relevant tax year.
• Your gross income for the tax year must be within the set limits:
• Up to ₹5 lakh under the old tax regime.
• Up to ₹12 lakh under the new tax regime.
• You should have income taxable at slab rates, as the rebate applies only to such income.
• Your tax liability should arise from normal income, as the rebate does not apply to income taxed at special rates such as capital gains.

Rebate under Section 156 of the Income Tax Act, 2015 is applied automatically on the income of the eligible tax payer. So, no additional documents are required to claim this benefit. This was the case under the provisions mentioned in the earlier 87A of the Income Tax Act, 1961.

Section 156 is a replacement of Section 87A of the Income Tax Act, 1961. Although both provisions provide the same level of tax relief to individuals, the new section clearly describes the rebate available under both the new as well as old tax regime. Additionally, the extent of marginal relief available under the new tax regime has also been clearly mentioned in this section.

Check out the table below to understand the key differences between the two sections:

Both Section 87A and Section 156 provide a tax rebate to resident individuals whose income is lower than a specified limit, based on the tax regime chosen. The objective of the new Section 156 remains the same - to reduce or eliminate excess tax liability for eligible taxpayers. However, the Income Tax Act, 2025 modernises the framework and expands the scope of relief.

When filing ITR online , the system automatically computes the due tax amount. So, in case, your income for the tax year qualifies for rebate under Section 156, the system will automatically consider it. You do not have to submit any additional documentation to claim this benefit as per current income tax rules.

You can make the most of Section 156 by planning your tax saving investments and expenses. This can help align your income with the applicable rebate limits. Below are some ways in which you can minimise your income tax liability: