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

1. Threshold increased from ₹7 lakh to ₹12 lakh
2. Maximum rebate raised from ₹25,000 to ₹60,000
3. Applies only to individuals opting for the new tax regime (Section 115BAC)

2. Capital Gains & Rebate Calculation

1. Capital gains taxed at special rates (Section 111A, Section 112, etc.) are excluded
2. If an individual earns ₹12 lakh from salary, they qualify for the rebate
3. 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?