Tax Rebate 2025: New Income Tax Benefits & Eligibility Explained
The Union Budget 2025 has introduced significant tax benefits for salaried individuals. With the latest updates, taxpayers can now claim rebates on income up to ₹12.75 lakh under the new tax regime.
✔ Tax-free income up to ₹12 lakh
✔ Standard deduction of ₹75,000 raises the effective limit to ₹12.75 lakh
✔ Maximum rebate under Section 87A increased to ₹60,000
✔ Capital gains not included in rebate calculation
Key Question:
👉 Does Tax Rebate 2025 apply if capital gains push total income above ₹12.75 lakh?
✅ Yes, as per the Finance Bill 2025, income taxed at special rates (e.g., capital gains) is excluded from rebate calculations.
This update provides massive relief for middle-class taxpayers while maintaining strict rules for capital gains taxation.
New Tax Slabs Under the Tax Rebate 2025
The new tax structure under Section 115BAC for Assessment Year 2026-27 is as follows:
Note: No changes have been proposed in the old tax regime, surcharge, or education cess.
How Tax Rebate 2025 Works: Key Updates
1. Higher Rebate Under Section 87A
- Threshold increased from ₹7 lakh to ₹12 lakh
- Maximum rebate raised from ₹25,000 to ₹60,000
- Applies only to individuals opting for the new tax regime (Section 115BAC)
2. Capital Gains & Rebate Calculation
- Capital gains taxed at special rates (Section 111A, Section 112, etc.) are excluded
- If an individual earns ₹12 lakh from salary, they qualify for the rebate
- If capital gains increase total income beyond ₹12.75 lakh, rebate eligibility remains intact
Example:
If your total income is ₹12.75 lakh, including ₹1 lakh from capital gains, you still qualify for the rebate since only regular income is considered.
Who Benefits from the Tax Rebate 2025?
Best for Salaried Individuals & Small Businesses
✔ Earners between ₹12 lakh and ₹12.75 lakh benefit the most
✔ Reduces tax burden on the middle class
✔ Encourages adoption of the new tax regime
Who Won’t Benefit?
❌ High-income individuals (above ₹12.75 lakh) – Rebate not applicable
❌ Those earning major income from capital gains – Not considered for rebate calculation
❌ Taxpayers opting for the old tax regime
Key Takeaway: The Tax Rebate 2025 makes the new tax regime more attractive, but capital gains taxation remains unchanged.
Tax-Free Income Up to ₹12.75 Lakh: How It Works
For Assessment Year 2026-27 (FY25), individuals earning up to ₹12.75 lakh will pay zero tax.
| Income Level | Previous Tax Liability | New Tax Liability (FY25) | Savings |
| ₹12 lakh | ₹80,000 | ₹0 | ₹80,000 |
| ₹12.75 lakh | ₹83,200 | ₹0 | ₹83,200 |
| ₹13 lakh | ₹90,000 | ₹90,000 | No rebate |
How Marginal Relief Applies
✅ If your income slightly exceeds ₹12 lakh, you get marginal relief
✅ Beyond ₹12.75 lakh, no rebate is available
Example Calculation:
📌 For ₹12.1 lakh income, tax liability before rebate is ₹61,500
📌 Marginal relief applies = ₹51,500 rebate granted
📌 Final tax payable: ₹10,000
Will Capital Gains Affect Tax Rebate 2025 Eligibility?
📌 Under Section 87A, capital gains are excluded from rebate calculations
📌 If salary income is below ₹12 lakh, you qualify for the rebate
📌 If capital gains increase total income above ₹12.75 lakh, rebate eligibility is unaffected
Example:
💡 If you earn ₹11.5 lakh from salary + ₹2 lakh from capital gains, you still get the ₹60,000 rebate since capital gains are taxed separately.
However, if your salary alone exceeds ₹12.75 lakh, you lose the rebate.
Is Tax Rebate 2025 a Game-Changer?
The Tax Rebate 2025 is a significant relief for middle-income taxpayers, effectively making income up to ₹12.75 lakh tax-free.
🚀 Key Takeaways:
✔ Higher tax rebate under Section 87A – Up to ₹60,000 savings
✔ Capital gains excluded from rebate calculations
✔ No tax on salary income up to ₹12.75 lakh
✔ New tax slabs offer better benefits for middle-class earners
💬 Do you think the Tax Rebate 2025 will encourage more taxpayers to opt for the new tax regime?
