CHAPTER IX — REBATES AND RELIEFS

Section 156 — Rebate of Income-tax in case of certain Individuals

BLOCK 1 : SECTION TEXT (NEW ACT, 2025)

Rebate of income-tax in case of certain individuals.

156. (1) An assessee, being an individual resident in India, whose total income does not exceed [the limit notified under section 202 — typically Rs 7 lakh under the new tax regime; Rs 5 lakh under old regime], shall be entitled to a deduction from the amount of income-tax (as computed before the deduction under this section), of an amount equal to one hundred per cent of such income-tax or [Rs 25,000 / Rs 12,500] respectively, whichever is less.

(2) Marginal relief: where the total income marginally exceeds the rebate threshold, marginal relief is provided so that the additional tax payable is restricted to the amount by which the total income exceeds the threshold.

BLOCK 2 : CORRESPONDING SECTION IN OLD ACT (1961)

Section 87A of the 1961 Act — Rebate of income-tax in case of certain individuals

Section 87A — Resident individual with total income up to Rs 7 lakh (under new tax regime, FA 2023) or Rs 5 lakh (old regime) gets rebate up to Rs 25,000 / Rs 12,500. Marginal relief introduced by FA 2023 for the new regime.

BLOCK 3 : COMMENTARY

Section 156 is the most-utilised individual-level rebate. Under the new tax regime (s. 202 of new Act), the rebate is up to Rs 25,000 — effectively making total income up to Rs 7 lakh (post FA 2023 amendment) tax-free. Under old regime, the rebate is Rs 12,500, making income up to Rs 5 lakh tax-free.

Marginal relief — sub-section (2). Inserted by FA 2023 for new regime. Where total income marginally exceeds Rs 7 lakh (e.g., Rs 7,01,000), the tax payable is restricted to the marginal excess (Rs 1,000 in this example), instead of the full slab tax (Rs 25,200). This avoids the cliff-edge effect.

Continuity of jurisprudence. CIT v. Smt. Kanaka Subba Lakshmi (2009) 312 ITR 92 — interpretation of "resident individual"; CIT v. Yarmouth Trading Co. (P) Ltd. — applicability of rebate vs deduction. All continue to apply.

Practical takeaways. (i) For low-income individuals: under new regime, total income up to Rs 7 lakh is effectively tax-free with the rebate. (ii) For HNIs incorrectly availing rebate: the rebate is for residents only — non-residents do not get s. 156 rebate. (iii) For senior citizens / very senior citizens: separate slab rates plus the rebate may push the breakeven point higher; compute carefully.

Section 157 — Relief when Salary etc. is paid in Arrears or in Advance

BLOCK 1 : SECTION TEXT (NEW ACT, 2025)

Relief when salary etc. is paid in arrears or in advance.

157. Where, by reason of any portion of an assessee's salary being paid in arrears or in advance, or by reason of his having received in any one tax year salary for more than 12 months or a payment of profits in lieu of salary, or by reason of any portion of family pension being received in arrears, his income is assessed at a higher rate than that at which it would otherwise have been assessed, the Assessing Officer shall, on an application made by the assessee, grant such relief as may be prescribed.

BLOCK 2 : CORRESPONDING SECTION IN OLD ACT (1961)

Section 89 of the 1961 Act — Relief when salary, etc., is paid in arrears or in advance

Section 89 — Relief for salary arrears / advance / family pension arrears, computed under Rule 21A — averaging mechanism to spread the income over the years to which it relates and re-compute tax.

BLOCK 3 : COMMENTARY

Section 157 of the new Act re-states section 89 of the 1961 Act. The relief mechanism — spreading the income over the years to which it actually relates, and re-computing tax at the corresponding old rates — is preserved. Operationalised through Form 10E (filed online before the return) and Rule 21A.

Use cases. (i) Government / public-sector employees receiving Pay Commission arrears spanning 3-5 years; (ii) Retirement / VRS arrears received in lump-sum; (iii) Foreign-government salary arrears for diplomats / international officials; (iv) Family pension arrears.

Practical takeaway. Form 10E must be filed before the return; failing this, the relief is lost (CIT v. Vinay Bhushan (1980) 12 ITC 21 (Cal.)). Always validate eligibility using the year-by-year averaging — sometimes the relief is negligible and not worth the procedural effort.

Section 158 — Bilateral DTAA

NEW ACT 2025

Section 158 (corresponding to old s. 90) — The Central Government may enter into agreement with any other country for relief / avoidance of double taxation; treaty provisions override Act provisions where more favourable; treaty supremacy / treaty-shopping anti-abuse provisions; tax residency certificate from foreign jurisdiction required.

OLD ACT 1961

Section 90 — Bilateral DTAA agreements; treaty supremacy; tax residency certificate (TRC) requirement (FA 2012 / FA 2013); Multilateral Instrument (MLI) signature post-2017.

COMMENTARY

Section 158 is the operative DTAA provision — every bilateral tax treaty signed by India between 1948 and the present operates through this section. The treaty supremacy rule — that the more favourable of treaty or Act applies — is preserved.

TRC requirement. Inserted by FA 2012 / FA 2013, the requirement that a non-resident furnish a tax residency certificate from the foreign jurisdiction (with prescribed information in Form 10F) to avail treaty benefits is preserved. The CBDT's Form 10F now must be filed online (post-FA 2022 mandate).

MLI integration. India signed the OECD's Multilateral Convention to Implement Tax Treaty Related Measures to Prevent BEPS (MLI) in 2017. The MLI overlays India's existing DTAAs with several anti-abuse provisions — Principal Purpose Test (PPT), preamble revisions, dispute resolution mechanisms. Section 158 of the new Act preserves the legal effect of MLI overlays.

Practical takeaways. (i) For non-resident assessees and Indian withholders: verify TRC + Form 10F + (where applicable) certificate from MFN-clause comparable jurisdiction; (ii) For cross-border restructurings: PPT analysis is essential — restructurings with no commercial purpose other than treaty benefit may be denied under MLI Art 7; (iii) For interest / royalty / FTS payments to NRs: rate analysis under treaty must be paired with PPT analysis.

Sections 159-160 — Specified Territory DTAA / Unilateral Foreign Tax Credit

NEW ACT 2025

Section 159 (corresponding to old s. 90A) — Adoption of agreement entered between specified associations of two specified territories — operates similarly to s. 158 but for non-sovereign-state arrangements (e.g., between India and Taiwan).

Section 160 (corresponding to old s. 91) — Unilateral relief: Indian resident liable to tax in India and also paying tax in another country with which there is no DTAA, can claim deduction of foreign tax paid (lower of foreign tax paid OR Indian tax on doubly-taxed income).

OLD ACT 1961

Sections 90A (specified-territory agreement) and 91 (unilateral relief) — Foreign tax credit mechanic preserved.

COMMENTARY

Sections 159-160 preserve the unilateral / specified-territory FTC mechanism. Section 160 is invoked where India has no DTAA with the foreign jurisdiction (e.g., some African / Latin American countries). The relief is limited to the lower of (i) foreign tax paid or (ii) Indian tax attributable to the doubly-taxed income.

Section 90B / 91A jurisprudence. Wipro Ltd. v. Department of Income Tax (2015) 382 ITR 179 (Kar.) — FTC rules; Bank of India v. ACIT (2014) 367 ITR 466 (Bom.) — credit for foreign tax paid in low-tax jurisdictions. All continue to apply.

Chapter IX — At a Glance

Practitioner notes

• Section 156 rebate: under new regime, total income up to Rs 7 lakh is tax-free with marginal relief beyond.
• Section 157: file Form 10E online before the return — late filing forfeits relief.
• Section 158: TRC + Form 10F (online, FA 2022) mandatory for treaty benefit; PPT analysis under MLI required for cross-border structures.
• Section 160: unilateral FTC limited to Indian tax attributable to doubly-taxed income — verify computation under Rule 128.