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Tax Laws and Practice · Basic Concept of Income Tax

Rebate of Income-tax for Resident Individuals under Section 156

Updated 11 October 2026 · Fact-checked

Section 156 of the Income-tax Act, 2025 gives a resident individual a rebate that reduces income-tax. Under section 156(1), total income up to ₹5,00,000 gets the lower of the tax or ₹12,500. Under section 156(2), for tax under section 202(1), income up to ₹12,00,000 gets the lower of the tax or ₹60,000.

Understand Rebate of Income-tax for Certain Individuals

A rebate is a deduction from the income-tax itself, not from income. You first compute the tax on total income. Then you subtract the rebate. This is different from a deduction under Chapter VIII, which reduces income before tax is computed.

Section 156 is for an individual resident in India. A non-resident individual, an HUF, a firm or a company cannot claim it. Section 155 adds two points: the rebate comes off the tax computed before the rebates in that Part, and it can never exceed that tax. So the rebate can bring tax down to nil but never below nil.

There are two rebates. Under section 156(1), if total income does not exceed ₹5,00,000, the rebate is 100% of the tax or ₹12,500, whichever is less. Under section 156(2), it applies where the total income is chargeable to tax under section 202(1). If income does not exceed ₹12,00,000, the rebate is 100% of the tax or ₹60,000, whichever is less.

The test is on total income, not gross total income and not salary. A person with total income of ₹12,00,001 loses the full rebate under (a). So section 156(2)(b) gives marginal relief. The tax payable after rebate is limited to the amount by which total income exceeds ₹12,00,000. The person is never worse off by more than the extra income earned.

There is also a limit for capital gains. Under section 198(7), where total income includes long-term capital gains taxed under section 198 (listed equity shares, equity-oriented fund units and business trust units, with STT paid as required), the rebate is allowed from the tax on total income reduced by the tax on those gains. So the rebate does not wipe out the 12.5% tax on those gains.

Key rules to remember

Rebate under section 156(1)
Rebate = lower of (tax payable before rebate, ₹12,500), if total income ≤ ₹5,00,000
For a resident individual. Total income must not exceed ₹5,00,000.
Rebate under section 156(2)(a)
Rebate = lower of (tax payable before rebate, ₹60,000), if total income ≤ ₹12,00,000
Applies where total income is chargeable to tax under section 202(1). A resident individual only.
Marginal relief under section 156(2)(b)
Rebate = Tax before rebate − (Total income − ₹12,00,000), if total income > ₹12,00,000 and tax > (Total income − ₹12,00,000)
Tax after rebate equals the excess of total income over ₹12,00,000. If tax is not more than the excess, no rebate arises.
Overall cap
Rebate ≤ tax computed before the rebate
Sections 155(2) and 156(3). Rebate cannot create a refund or negative tax.
Capital gains under section 198
Rebate is allowed from tax on (total income − LTCG taxed under section 198)
Section 198(7). The 12.5% tax on such LTCG above ₹1,25,000 is not reduced by the rebate.

How to solve Rebate of Income-tax for Certain Individuals questions

Use this order for any question on rebate of income-tax. Check eligibility first, then compute tax, then apply the right rebate.

  1. 1Check the status. Is the assessee an individual and resident in India? If not, no rebate under section 156.
  2. 2Compute total income after all allowed deductions. Compare this figure, not gross total income, with the limit.
  3. 3Note which tax rates apply. Section 156(1) has a ₹5,00,000 limit. Section 156(2) applies to income chargeable under section 202(1) and has a ₹12,00,000 limit.
  4. 4Compute the income-tax before rebate using the slab rates in the question. If the total income includes LTCG under section 198, tax it separately at 12.5% on the gains above ₹1,25,000.
  5. 5Apply the rebate. If total income is within the limit, rebate is the lower of the tax or the cap (₹12,500 or ₹60,000). If it is above ₹12,00,000 under section 156(2), work out marginal relief.
  6. 6Subtract the rebate from the tax, taking care that the result is not below nil.
  7. 7Add health and education cess on the tax after rebate, as the question requires, and show tax payable.
  8. 8Write the conclusion in one line: provision, calculation, and the final tax payable.

Quickest way: Three-check shortcut for rebate questions

When to use it: Use it when time is short and the question gives you total income and asks for tax payable after rebate.

  1. Check 1: resident individual? If no, stop. No rebate.
  2. Check 2: where does total income stand? Up to the limit means rebate equals the tax (if tax is below the cap). Slightly above ₹12,00,000 means marginal relief.
  3. Check 3: for marginal relief, do not compute the rebate first. Compare tax with (total income − ₹12,00,000). The lower of the two is the tax after rebate.
  4. Then add cess on that final tax and write the answer.

Common mistakes in Rebate of Income-tax for Certain Individuals

  • Giving the rebate to an HUF, a firm or a non-resident individual.

    Students remember the amount and forget the status condition.

    Fix: Write 'resident individual' as the first line of your answer and confirm it from the facts.

  • Comparing gross total income, or salary, with the ₹12,00,000 or ₹5,00,000 limit.

    The limit is loosely described as 'income' in notes.

    Fix: Deduct everything allowed first. The test applies to total income as defined in the Act.

  • Applying the full ₹60,000 rebate when total income is just above ₹12,00,000.

    Students remember the rebate cap and skip the income condition.

    Fix: Above ₹12,00,000, only marginal relief under section 156(2)(b) applies. Tax after rebate is capped at the excess over ₹12,00,000.

  • Adding cess before deducting the rebate.

    Students treat cess like part of the slab tax.

    Fix: Deduct the rebate from the tax first, then compute cess on the balance.

  • Letting the rebate reduce the 12.5% tax on LTCG covered by section 198.

    Students apply the rebate to the whole tax figure.

    Fix: Under section 198(7), apply the rebate only against tax on income other than those gains. Compute the two tax amounts separately.

  • Showing negative tax or a refund because the rebate is larger than the tax.

    Students subtract the full cap, such as ₹12,500, without comparing it with the tax.

    Fix: Rebate is the lower of the tax and the cap, as section 155(2) and section 156(3) say. Tax after rebate cannot be below nil.

Worked examples

Example 1

Mr. Arjun Mehta, a resident individual, has total income of ₹11,50,000 for the tax year, chargeable under section 202(1). Assume the section 202(1) rates for this question are: nil up to ₹4,00,000; 5% on ₹4,00,001 to ₹8,00,000; 10% on ₹8,00,001 to ₹12,00,000. Compute his tax payable after rebate under section 156.

Show the solution
  1. Provision: section 156(2)(a) gives a rebate of the lower of the tax or ₹60,000 where total income does not exceed ₹12,00,000 and is chargeable under section 202(1).
  2. Status check: Mr. Mehta is a resident individual and total income of ₹11,50,000 is within ₹12,00,000.
  3. Tax on first ₹4,00,000 = nil.
  4. Tax on next ₹4,00,000 at 5% = ₹20,000.
  5. Tax on remaining ₹3,50,000 (₹11,50,000 − ₹8,00,000) at 10% = ₹35,000.
  6. Tax before rebate = ₹20,000 + ₹35,000 = ₹55,000.
  7. Rebate = lower of ₹55,000 and ₹60,000 = ₹55,000.
  8. Tax after rebate = ₹55,000 − ₹55,000 = nil. Cess on nil = nil.

Answer: Tax payable is nil. Rebate of ₹55,000 is allowed under section 156(2)(a).

Example 2

Ms. Kavita Nair, a resident individual, has total income of ₹12,10,000 chargeable under section 202(1). Assume the section 202(1) rates for this question are: nil up to ₹4,00,000; 5% on ₹4,00,001 to ₹8,00,000; 10% on ₹8,00,001 to ₹12,00,000; 15% on ₹12,00,001 to ₹16,00,000. Cess is 4%. Compute her tax payable.

Show the solution
  1. Provision: total income exceeds ₹12,00,000, so section 156(2)(a) does not apply. Section 156(2)(b) gives marginal relief if tax exceeds the excess of total income over ₹12,00,000.
  2. Excess over ₹12,00,000 = ₹12,10,000 − ₹12,00,000 = ₹10,000.
  3. Tax on first ₹4,00,000 = nil.
  4. Tax on next ₹4,00,000 at 5% = ₹20,000.
  5. Tax on next ₹4,00,000 at 10% = ₹40,000.
  6. Tax on last ₹10,000 at 15% = ₹1,500.
  7. Tax before rebate = ₹20,000 + ₹40,000 + ₹1,500 = ₹61,500.
  8. Check: tax ₹61,500 exceeds the excess of ₹10,000, so marginal relief applies.
  9. Rebate = ₹61,500 − ₹10,000 = ₹51,500.
  10. Tax after rebate = ₹61,500 − ₹51,500 = ₹10,000.
  11. Cess at 4% on ₹10,000 = ₹400.
  12. Total tax payable = ₹10,000 + ₹400 = ₹10,400.

Answer: Rebate under section 156(2)(b) is ₹51,500. Tax payable including cess is ₹10,400.

Exam tips

  • Begin every answer by stating the provision: 'Under section 156 of the Income-tax Act, 2025, a resident individual...' This earns marks even if the calculation slips.
  • Always check status and the total income limit before computing the rebate. Many questions are built to test one failing condition, such as a non-resident or an HUF.
  • In marginal relief questions, show the excess over ₹12,00,000, the tax before rebate, and the comparison. Examiners look for these three lines.
  • Use the slab rates given in the question. Show tax slab by slab so that part marks are secured.
  • Remember section 198(7) when a question mixes LTCG on listed shares with other income. Tax the gains separately and apply the rebate to the rest.

Practice questions from Basic Concept of Income Tax

Rebate of Income-tax for Certain Individuals in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Rebate of Income-tax for Certain Individuals: frequently asked questions

Who can claim rebate under section 156 of the Income-tax Act, 2025?

Only an individual who is resident in India. HUFs, firms, companies and non-resident individuals cannot claim it. The total income must also be within the limit in section 156(1) or section 156(2).

What is the rebate limit for total income up to ₹12 lakh?

Under section 156(2)(a), where total income is chargeable to tax under section 202(1) and does not exceed ₹12,00,000, the rebate is 100% of the tax or ₹60,000, whichever is less.

What happens if total income is slightly above ₹12 lakh?

Section 156(2)(b) gives marginal relief. The rebate equals the tax minus the amount by which total income exceeds ₹12,00,000. So the tax after rebate equals that excess, if the tax is higher than the excess.

Is rebate deducted before or after cess?

Rebate is deducted from the income-tax first. Cess is then computed on the tax remaining after the rebate. If the tax after rebate is nil, cess is also nil.

Does the rebate apply to tax on long-term capital gains?

Not to the tax on gains covered by section 198. Under section 198(7), the rebate is allowed from the tax on total income reduced by the tax payable on those long-term capital gains.