Difference in rebates and deductions


Rebates and deductions are sometimes used interchangeably but there is a line of demarcation between them. However, the intent of statue is the same i.e, reduction of tax burden but the difference lies in its usage.
Learn the difference here


Rebate is an amount which is returned or discounted by the government from the tax due which an individual is liable to pay to government bodies.
This amount of tax rebate is percentage of the total tax liability, which is reduced from the total tax due and the remaining is paid to the government.
Rebate is the amount by which the tax liability of an assesse is reduced by providing abatement or by refunding the tax.
Total Tax Liability: xxx
Less (Rebate) : (xxx)
Tax to be paid : xxx
For Example: As per section 4A of Central Excise Act 1944, provides for valuation of goods on the basis of MRP which is mandatorily to be specified on the products the rebate provided is to be deducted from the MRP which is provided in the official gazette of India.This is specified percentage which is deducted from the MRP to arrive at tax liability.


Deductions are an amount which are allowed specifically under the statue of law, deductions are the benefits provided to the taxpayers in order to reduce their taxable income. Tax deductions form the basis of tax planning in India.
Deductions are reduced from the gross total income in order to arrive at the taxable income of an individual.
The expenses which are incurred by an assesse, for which provisions are specified by government under the act, are allowed to be reduced from the gross total income as tax deductible expense.
Gross Total Income (Sum of amount earned under various heads): xxx
Less Deductions under chapter VI-A : (xxx)
Taxable income: xxx

For Example, an amount paid by an assesse towards PPF for self, spouse, and children, any amount paid towards pension fund, a subscription towards notified bonds of NABARD, etc. are all tax deductible expenses allowed under section 80 C, of Income Tax Act 1961.

Are tax rebates as good as tax deductions?

There is a very thin line of demarcation between the intension behind providing the tax rebates and tax deductions. A tax rebate is provided to promote trade by providing a discount in liability or refunding it, whereas tax deductions are for allowing certain expenditure to be claimed by an assesse which he incurs for his benefit. But both directly or indirectly help in reducing tax burden.
Thus, the benefit to an assesse depends on his nature of work. Tax rebates are always a fixed percentage whereas the amount of deduction depends on the expense incurred by an assesse.

Hope it helps you to plan your tax better. If you need help regarding tax planning and investment plan, please write to us on pankajgera2000@gmail.com

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