Section 155 of the Income-tax Act, 2025 — Rebate to be Allowed in Computing Income-tax

In plain language

What Section 155 actually does

Section 155 of the Income-tax Act, 2025 is the enabling or "framework" provision for tax rebates. It does not itself fix any rupee amount or income limit. Instead, it tells you two things: (1) that a rebate shall be allowed from the income-tax computed on your total income, and (2) the exact rebate to be given is whatever is specified in Section 156. Think of Section 155 as the doorway and Section 156 as the room where the actual numbers live.

• Sub-section (1): In computing income-tax on your total income for any tax year, there shall be allowed from the income-tax (as computed before allowing the deductions under this Part), subject to Section 156, the deductions specified in that section.
• Sub-section (2): The deduction under Section 156 shall not, in any case, exceed the income-tax (as computed before allowing these deductions) on your total income. In plain words — a rebate can reduce your tax to zero, but it can never create a refund or a negative tax.

The 1961 Act equivalent

In the old Income-tax Act, 1961, this "enabling" role was played by Section 87 ("Rebate to be allowed in computing income-tax"), which pointed to Section 87A (the individual rebate). The 2025 Act simply renumbers and re-organises the same idea: Section 155 is the new Section 87, and Section 156 is the new Section 87A. The policy is unchanged — only the section numbers moved.

Who it applies to

• Section 155 is a machinery provision that applies to every assessee for whom a rebate is available — but because it only routes to Section 156, in practice the benefit reaches the class of persons Section 156 covers: resident individuals.
• Not available to non-residents (NRIs), HUFs, firms, LLPs, companies, or AOP/BOI — because Section 156 is limited to resident individuals.

Key conditions and limits (via Section 156)

• Old / normal regime: rebate up to ₹12,500 where total income does not exceed ₹5,00,000.
• New regime (Section 202 default regime): rebate up to ₹60,000 where total income does not exceed ₹12,00,000, with marginal relief for income just above ₹12 lakh (roughly up to ₹12.75 lakh).
• Rebate cap (Section 155(2)): the rebate can never be more than the tax actually computed — so it can wipe out tax but not generate cash back.
• Special-rate income is excluded: the rebate does not apply to income taxed at special flat rates, such as long-term capital gains on listed equity/equity mutual funds under Section 112A (of the 1961 Act) and certain short-term capital gains. Even if your total income is within the limit, tax on that special-rate slice is still payable.
• Automatic benefit: no separate form or claim — it is applied while computing tax in the return.

How it interacts with other sections

• Section 156 supplies the amounts and eligibility — Section 155 cannot operate without it.
• Section 202 governs the default new tax regime whose ₹12 lakh threshold drives the ₹60,000 rebate.
• The rebate is applied before other deductions "under this Part" (such as reliefs), and it is computed after your total income and gross tax are worked out.

Practical implications

• If you are a resident individual earning up to ₹12 lakh under the new regime, your effective income-tax can be nil — this is the single biggest reason most middle-income salaried taxpayers pay zero tax.
• Watch the "cliff": crossing the ₹12 lakh line by even a rupee would ordinarily cost far more than the extra income — which is why marginal relief exists, capping the tax at roughly the amount by which income exceeds ₹12 lakh.
• Capital gains and other special-rate income sit outside the rebate umbrella, so plan share/mutual-fund sales carefully.