Tax Rebate Confusion: Clarification awaited in Budget 2025:

Tax Rebate Confusion: Clarification awaited in Budget 2025 The year 2024 is coming to an end, and with the start of the new year, common people and tax professionals are eyed for the upcoming Budget 2025. It is believed that the upcoming Budget 2025 will bring major relief to various sectors and taxation. Tax professionals are looking for relief in the rebate schemes. A rebate, that is provided to reduce the tax liability. The rebate under Section 87A was the most discussed matter around the ITR filing season in the year 2024. There was some confusion among the taxpayers about the rebate. And also in some cases, this rebate under section 87A was denied at the time of filing and processing of ITR. Many tax professionals were so unsatisfied with the operation of the income tax portal. The portal was not even calculating the rebate amount at the time of filing.

What is Section 87A Rebate under New Tax Regime?

A maximum rebate of Rs.25,000 is allowed to an individual under section 87A, if the total income of an individual who is opting for the new tax scheme under Section 115BAC(1A) is chargeable to tax under section 115BAC(1A) and total income does not exceed Rs.7,00,000.

Confusion Around Section 87A Rebate

Now up to FY 23-24, tax under the New Tax Regime for income up to Rs.700,000 was Rs.25,000, so this made sense. But as per Finance Act 2024, Tax on income of Rs.700,000 is Rs.20,000. And tax on income of Rs.750000 is Rs.25,000.

Change in Income Tax Slabs in New Tax Regime

Tax Slabs AY 2025-26		Tax Slabs AY 2024-25
Total Income (Rs)	Rate	Total Income (Rs)	Rate
Upto Rs. 3,00,000	Nil	Upto Rs. 3,00,000	Nil
From Rs. 3,00,001 to Rs. 7,00,000	5 per cent	From Rs. 3,00,001 to Rs. 6,00,000	5 per cent
From Rs. 7,00,001 to Rs. 10,00,000	10 per cent	From Rs. 6,00,001 to Rs. 9,00,000	10 per cent
From Rs. 10,00,001 to Rs. 12,00,000	15 per cent	From Rs. 9,00,001 to Rs. 12,00,000	15 per cent
From Rs. 12,00,001 to Rs. 15,00,000	20 per cent	From Rs. 12,00,001 to Rs. 15,00,000	20 per cent
Above Rs. 15,00,000	30 per cent	Above Rs. 15,00,000	30 per cent

With a change in tax slab, tax on income of Rs.7.50 lakh decreased to Rs.25000. But the amendment in the proviso to Section 87A increasing the eligibility up to an income of Rs.7.50 lakh for the Section 87A rebate was missed out in Finance Act 2024. We hope, this matter will be resolved in the upcoming Budget 2025.