Chapter IX - Rebates and Reliefs
Section 156
Section 156: income-tax rebate for resident individuals
Section 156 is the Income-tax Act, 2025's version of the rebate long known as "87A" - it doesn't reduce your income, it reduces the tax you actually pay, effectively making tax payable nil (or close to it) for individuals below a certain income threshold. The section works together with Section 155, which sets the general framework that this rebate is deducted from tax payable, capped at the tax otherwise due.
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Need advice on Section 156?
This article is for general information. Refer to the Income-tax Act, 2025 as amended by the Finance Act, 2026 and the Taxation and Other Laws (Amendment) Act, 2026 for the official provisions. If you need professional advice for your situation, contact Bizeneed.
Statutory text
Bare law
(1) An assessee, being an individual resident in India, shall be entitled to a deduction of 100% of income-tax payable or ₹ 12500, whichever is less, from the income-tax (computed before allowing the deduction under this section) chargeable on the total income for any tax year if such total income does not exceed ₹ 500000.
(2) Where the total income of a resident individual assessee for any tax year is chargeable to tax under section 202(1), then from income-tax (computed before allowing the deduction under this section) following deductions shall be allowed, if— (a) the income does not exceed twelve lakh rupees, 100% of the income-tax payable or ₹ 60000, whichever is less; (b) the total income exceeds twelve lakh rupees and the income-tax payable on such total income exceeds the amount by which the total income is in excess of twelve lakh rupees, an amount equal to the amount by which the income-tax payable on such total income is in excess of the amount by which the total income exceeds twelve lakh rupees.
(3) The deduction under sub-section (2), shall not exceed income-tax payable as per the rates provided in section 202(1).
Introduction
Section 156 provides different income-tax rebates for eligible resident individuals under the ordinary and Section 202(1) regimes. The latter includes a ₹12 lakh threshold, a ₹60,000 ceiling and a marginal-relief calculation above the threshold.
Key takeaways
Resident individual rebate
A resident individual with total income up to ₹5 lakh may claim a rebate equal to tax payable or ₹12,500, whichever is lower.
Section 202(1) computation
Where the new-regime computation applies, a resident individual with total income up to ₹12 lakh may claim tax payable or ₹60,000, whichever is lower; limited marginal relief may apply just above ₹12 lakh.
Rebate under the general (old-regime) slabs
A resident individual is entitled to a rebate of 100% of the income-tax payable, or ₹12,500, whichever is less, if their total income does not exceed ₹5,00,000.
Rebate under the default new-regime rates (Section 202(1))
Where the individual's income is taxed under the default new-regime rates in Section 202(1), a different, more generous rebate applies:
- If total income does not exceed ₹12,00,000: rebate of 100% of the income-tax payable, or ₹60,000, whichever is less.
- If total income exceeds ₹12,00,000 and the tax payable on it exceeds the amount by which income exceeds ₹12,00,000: a marginal-relief rebate equal to that excess tax amount, so tax payable doesn't jump disproportionately just past the ₹12,00,000 mark.
Key point
The deduction under Section 156 can never exceed the income-tax otherwise payable on the total income for the year - it can bring tax down to nil, but doesn't create a refund of tax not otherwise owed.
Step-by-step flow for applying Section 156
- 1
Is the assessee an individual resident in India?
- No: No rebate under Section 156.
- Yes: Go to the next step.
- 2
Is total income chargeable at the rates in Section 202(1)?
Section 156(1) is not limited to either case: any resident individual whose total income does not exceed ₹5,00,000 qualifies for 100% of tax or ₹12,500, whichever is less. Where Section 156(2) applies, its clause (a) amount (100% of tax up to ₹60,000) is never lower than the Section 156(1) amount on the same tax, so the steps below cover that case.
- No: Only Section 156(1) can apply: if total income does not exceed ₹5,00,000, rebate = 100% of tax or ₹12,500, whichever is less; otherwise no rebate.
- Yes: Go to the next step (Section 156(2)).
- 3
Does total income exceed ₹12,00,000?
- No: Rebate = 100% of tax or ₹60,000, whichever is less.
- Yes: Go to the next step.
- 4
Does the tax payable exceed the amount by which total income exceeds ₹12,00,000?
- Yes: Rebate = tax payable minus that excess income, so tax after rebate equals the excess income.
- No: No rebate.
- 5
Check the ceiling
Under Section 156(3) the deduction cannot exceed the tax payable at the Section 202(1) rates.
Practical checklist
Do
- Confirm resident-individual status, chosen regime, total income and tax before rebate.
- Under Section 202(1), separately test the ₹12 lakh full-rebate condition and marginal relief just above it.
Avoid
- Do not use the ordinary-regime ₹12,500 rebate together with the new-regime ₹60,000 rule.
- Do not let the subsection (2) rebate exceed tax calculated at Section 202(1) rates.
Illustrative example
Worked example: rebate under the Section 202(1) rates
Hypothetical facts (illustration only, not a real taxpayer): Two resident individuals are taxed at the Section 202(1) rates. The pre-rebate tax figures are assumed for illustration only (the slab rates are in Section 202(1), not in this section): Neha has total income of ₹11,00,000 with assumed tax of ₹50,000; Arjun has total income of ₹12,10,000 with assumed tax of ₹61,500.
Neha: clause (a)
Income does not exceed ₹12,00,000. Rebate = lower of ₹50,000 and ₹60,000 = ₹50,000. Tax after rebate: nil.
Arjun: excess income
₹12,10,000 - ₹12,00,000 = ₹10,000.
Arjun: clause (b)
Tax of ₹61,500 exceeds ₹10,000, so rebate = ₹61,500 - ₹10,000 = ₹51,500.
Arjun: ceiling
₹51,500 does not exceed the tax of ₹61,500, so Section 156(3) is satisfied. Tax after rebate: ₹10,000.
Outcome
- Neha pays no tax; Arjun pays ₹10,000, equal to his income above ₹12,00,000.
- Actual tax must be computed with the Section 202(1) rates for the year before applying these steps.
Glossary
- Rebate
- A deduction from computed income tax, distinct from an income deduction.
- Marginal relief
- The tax reduction available under subsection (2)(b) where tax otherwise exceeds income above ₹12 lakh.
Frequently asked questions
Is this the rebate people call "87A"?
Yes - the same low-income rebate mechanism, now numbered Section 156 under the Income-tax Act, 2025, with different limits depending on which tax regime (old-style slabs or the Section 202(1) default rates) applies to you.
What's the maximum rebate under the new-regime rates?
₹60,000, if total income does not exceed ₹12,00,000 - plus a marginal-relief rebate for income just above that threshold, so the tax increase doesn't outpace the income increase.
Does this rebate apply to non-residents?
No - Section 156 is limited to an individual who is resident in India.
Can this rebate make my tax liability negative (a refund)?
No - the rebate is capped at the income-tax otherwise payable on your total income; it can reduce tax to zero but not below zero.
Need help applying this provision to your situation?
Check whether the Section 156 rebate applies to youLast updated 10 October 2026