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TMI BlogRevamped framework for granting rebates on income tax to certain individuals Under Clause 156 of Income Tax Bill, 2025 Vs. Section 87 of the Income-tax Act, 1961X X X X Extracts X X X X X X X X Extracts X X X X ..... in the Income-tax Act, 1961, particularly Section 87 and its associated provisions such as Section 87A. The new clause not only raises the rebate threshold but also introduces a tiered structure for higher income brackets, reflecting evolving policy priorities toward greater tax equity and relief for the middle class. Section 87 of the Income-tax Act, 1961, in contrast, is a general enabling provision that authorizes the deduction of rebates as specified in other sections (notably Section 87A and previously Sections 88, 88A-D, now omitted), but does not itself set out the quantum or eligibility for any particular rebate. This commentary provides a comprehensive analysis of Clause 156, dissects its components, explores its legislative inten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e robust and inclusive rebate regime, particularly in light of contemporary economic challenges and the policy objective of bolstering disposable income among the lower and middle classes. Detailed Analysis of Clause 156 of the Income Tax Bill, 2025 Rebate for Individuals with Income up to Rs. 5 Lakh Clause 156(1) provides a direct successor to the current Section 87A rebate, but with legislative clarity and consolidation within the new Bill. The key features are: * Eligibility: Only resident individuals with total income not exceeding Rs. 5 lakh are eligible. * Quantum: The rebate is capped at the lower of 100% of the income tax payable or Rs. 12,500. * Computation: The rebate is applied to the tax computed before the deduct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions include: * Increased Disposable Income: Taxpayers in the middle-income segment will see a significant reduction in tax outgo, boosting consumption and savings. * Simplification: The consolidation of rebate provisions may reduce compliance burdens and litigation. * Equity: The progressive phase-out ensures that relief is targeted and does not disproportionately benefit higher-income individuals. Administrative and Compliance Considerations * Procedural Simplicity: The clear thresholds and amounts facilitate easier computation by taxpayers and tax authorities. * Potential for Disputes: As with any new provision, initial years may see interpretative disputes, especially regarding the calculation of the phase-out for incomes ju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o Rs. 5 lakh. * Clause 156: Same rebate for income up to Rs. 5 lakh, but an enhanced rebate of up to Rs. 60,000 for income up to Rs. 12 lakh, and a phase-out for income above Rs. 12 lakh. This represents a major policy shift, extending relief to the middle class, which was previously excluded. Legislative Technique and Clarity Section 87's approach of referencing other sections has led to a somewhat fragmented and complex rebate regime, with multiple amendments, insertions, and omissions over the years. Clause 156 consolidates the rebate framework in a single provision, reducing interpretative complexity and legislative clutter. Policy and Equity Considerations The existing regime u/s 87/87A is criticized for its abrupt cut-of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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