INCOME TAX REBATES for FY 2025-26

Income Tax Rebates FY 2025-26 differ sharply under the old and new tax regimes, mainly due to the updated Section 87A rebate and standard deduction rules.

Rebates you get under old and new tax regimes in FY 2025-26

The Article on ” TAX PLANNING FOR FY 2025-26  CONTAINS 11  PARTS

 PART I: MAJOR CHANGES IN TAX RULES FOR FY 2025-26 

 PART 2 : TAX SLABS /RATES FOR FY 2025-26

​ PART 3 : TAX REBATES FOR FY 25-26 

PART 4 :  CAPITAL GAIN TAX  FOR FY 2025-26

PART 5 : TAX ON  SALE OF RESIDENTIAL PROPERTY 

PART 6 :  TAX ON MUTUAL FUNDS

PART 7:   TAX ON INSURANCE

PART 8 : INCOME TAX CALCULATOR FOR FY 2025-26

PART 9 : TAX ON RETIREMENT BENEFITS FOR FY 2025-26

PART 10 : HOW TO PAY INCOME TAX ONLINE? 

PART 11 : ​TO KNOW ALL ABOUT TDS RATES , 

PART 3 – INCOME TAX REBATES FOR 2025  -26

Tax rebates under old regime : 

For FY 2025-26, here is the breakdown of the rebates and major tax-saving avenues available only in the Old Regime.

1. The Core Rebate: Section 87A

This is the only “true” rebate that applies after you have calculated your tax.

• Eligibility: Only for Resident Individuals.
• Income Limit: Your Net Taxable Income (after all deductions) must not exceed ₹5,00,000.
• Rebate Amount: 100% of the income tax or ₹12,500, whichever is lower.
• Effect: If your taxable income is ₹5 Lakh or less, your tax becomes Zero.

Important Change for FY 2025-26: Starting this year, the Section 87A rebate cannot be used to offset tax on “special rate” incomes like Short-Term Capital Gains (STCG) on shares or Long-Term Capital Gains (LTCG). It only applies to your regular slab-rate income.

2. Standard Deduction

• Amount: ₹50,000.
• Who gets it: Every salaried professional and pensioner. It is a flat deduction from your gross salary before any other calculations.
• (Note: In the New Regime, this was increased to ₹75,000 for FY 2025-26, but it remains ₹50,000 in the Old Regime.)

3. Major Chapter VI-A Deductions

These reduce your “Taxable Income” before the tax is calculated

4. Special Exemptions (Allowances)

These are parts of your salary that are not counted as income at all if you have the bills:

• House Rent Allowance (HRA): Exempt based on the rent you pay (if you live in a rented house).
• Leave Travel Allowance (LTA): Exempt for domestic travel costs twice in a block of four years.
• Section 24(b): Interest paid on a Home Loan for a self-occupied property up to ₹2,00,000.

Summary Table: Old vs. New (FY 2025-26)

TAX REBATES UNDER THE NEW REGIME

If you opt for the New Tax Regime in FY 2025-26, you exchange almost all specific tax-saving investments for a simpler system with lower tax rates.

Here is a clear breakdown of what you would lose (forgo) and what you still get to keep if you switch.

1. What you will LOSE (Deductions not available)

The New Tax Regime operates on the principle of removing “incentivized savings.” You will no longer be able to claim:

• Section 80C: No deduction for PPF, EPF, LIC premiums, ELSS, Home Loan Principal, or school fees (up to ₹1.5 Lakh).
• Section 80D: No deduction for Health Insurance premiums for self or parents.
• House Rent Allowance (HRA): Your entire HRA component will become fully taxable.
• Home Loan Interest (Self-Occupied): You cannot claim the ₹2 Lakh deduction under Section 24(b) for a house you live in.
• Section 80TTA / 80TTB: Interest earned on savings accounts and FDs (for seniors) becomes fully taxable.
• Leave Travel Allowance (LTA): Exemption for travel tickets/expenses is removed.
• Professional Tax: The ₹2,500 usually deducted from your gross salary is no longer deductible.
• Other Minor Allowances: Children’s education allowance, helper allowance, etc., are gone.
• Section 80G: Deductions for donations to charities are not allowed.

2. What stays AVAILABLE (Deductions you still get)

The government has allowed a few specific deductions to remain to ensure the New Regime is attractive:

• Standard Deduction (Increased): You get a higher deduction of ₹75,000 (it is only ₹50,000 in the Old Regime for FY 2025-26).
• Employer NPS Contribution (80CCD(2)): Deductions for the amount your employer puts into your NPS (up to 14% of your salary) are still allowed.
• Family Pension Deduction: If you receive a family pension, you can deduct ₹25,000 (increased from ₹15,000).
• Agniveer Corpus Fund (80CCH): Contributions to this fund remain deductible.
• Specific Allowances:
  • Conveyance allowance for employees with disabilities.
  • Daily allowance for travel/commute for official duties.
  • Exemption on Gratuity and Leave Encashment (upon retirement/resignation).

Home Loan Interest (Let-out Property): While you lose interest deduction for your own home, you can still deduct interest paid on a rented-out property (though you cannot set off a “loss from house property” against your salary income).

Summary Table

The New Regime becomes better only if the total “lost” deductions (like 80C + HRA + Home Loan) are less than a certain threshold. For an income of ₹15 Lakh, that threshold is usually around ₹4.25 Lakh to ₹4.5 Lakh in total deductions.

TAX REBATES THAT DO NOT INVOLVE ​ANY FRESH INVESTMENTS :

Without investing your money in any scheme ,you can claim Tax Deduction /rebate in FY 2025-26 by utilizing the following Tax provisions:
All below-listed rebates are available only if you opt for the old regime which is available both in old and new regimes.​

1. Health Insurance premium paid between Rs 25,000 to Rs 1.00 lakh under section 80D

2. Interest on Education Loan paid under section 80E

​3. Deductions allowed Rs 50,000/1,50,000 under Section 80EE/80 EEA for the Interest on Housing loans with certain conditions . ​

4. Deductions allowed Rs 2.00 lakhs under Section 24 for the Interest on Housing loans .
​5. Deductions allowed Rs 1,50,000 under Section 80 EEB for the Interest on loans taken for the purchase of electric vehicles ​.

6. Interest on savings bank accounts is exempted by tax up to an amount of Rs 10,000 under Section 80TTA and for senior citizens only if they have not claimed under section 80TTB .

​7. Interest received by a senior citizen on deposits with banks / co-operative societies/post office is exempted up to Rs 50,000 under section 80 TTB 

8. Rent paid in excess of 10% of total income for furnished/unfurnished residential accommodation (subject to a maximum of Rs. 5,000 p.m. or 25% of total income, whichever is less) subject to certain conditions under section 80 GG section ​. 

9.Donations made to certain organizations under sections 80G & 80 GGA,80 GGB 

10. The total tuition fee paid by a parent for a maximum of two children is eligible for tax exemption under 80C .​

​You may check the details of the above rebates and can utilize them while submitting IT Returns

TAX REBATE UNDER 80C FOR TUITION FEE PAID AVAILABLE UNDER OLD REGIME

DO YOU KNOW ? : Parents can claim Tax Rebate under section 80c for the tuition fees paid for their wards to educational institutions
Total tuition fee paid by a parent for maximum of two children is eligible for tax exemption under 80C .“Tuition fees (excluding development fees, donations, etc.) paid by an individual to any university, college, school or other educational institution situated in India, for full time education of any 2 of his/her children” is eligible to be deducted under 80C .
Tuition fees paid for self or spouse is NOT eligible under 80C . Fees paid to educational institutions situated outside India are not eligible . Only University, college, school or other educational institution must be situated in India though it can be affiliated to any foreign institutes. Tuition fee Paid for children for full time courses only is eligible. Obviously fees paid for coaching classes will not be eligible . ​
Pre-nursery, play school and nursery class fees is also covered under section 80C (circular 9/2008 & 8/2007).If both husband and wife are tax payers ,both can utilise the deduction separately for the individual payments made by them .
Not allowable Expenses:-
1. Development fees or donation not eligible.

 2. Transport charges, hostel charges, Mess charges, library fees, scooter/cycle/car stand charges incurred for education are not allowed.

3. Late fees is not eligible for deduction. 

4. Term Fees are not eligible for deduction.

THIS ARTICLE CARRIES INFORMATION ON VARIOUS TAX PROVISIONS WHICH ARE GENERALLY USEFUL .YET IT DOES NOT CARRY ALL THE PROVISIONS AND HENCE YOU ARE ADVISED TO GO THROUGH INCOME TAX DEPARTMENT WEBSITES FOR AUTHENTIC COMPLETE INFORMATION, ESPECIALLY FOR THOSE WHO HAVE GOT MULTIPLE STREAMS OF INCOME OR COMPLEX INVESTMENTS .YOU MAY ALSO CONSULT A QUALIFIED TAX CONSULTANT / CHARTERED ACCOUNTANT FOR ANY CLARIFICATION. READERS ARE ALSO WELCOME TO SEND FEEDBACK , FORM AVAILABLE BELOW. WE ARE OPEN FOR CORRECTION IF NEEDED

This article is for informational purposes only. It summarises updates from publicly available sources and AI-generated insights. We have extensively used information gathered from a reputed AI app in preparing this article We are not SEBI-registered investment advisors, and this content does not constitute investment advice