Rebates are commonly used as an incentive to purchase products. A number of businesses look for individuals to process rebates by checking the information provided to see if it is correct and submitting the rebate. It is a job that can comfortably be carried out from home.
The concept is increasingly generating interest as many people want to be part of this new money making opportunity. The amount to be made is determined by the number of rebates that can be processed on a daily basis.
There are a lot of companies online that are prepared to pay individuals to process their rebates. It is a simple process. It only takes a little typing and filling out some forms. When you sign up, you will be able to access the customer database and simply follow the steps outlined.
- What Are Internet Rebate Processing Jobs?
- How to Make Money With Rebate Processor Jobs
- How to Apply For Rebate Processor Jobs
- What Are The Compensation For Rebate Processor Jobs?
- What Does a Rebate Specialist do?
- What is a Rebate in Procurement?
- How Do Rebates Work?
- What Are The Types of Rebates?
- How do You Negotiate a Supplier Rebate?
- Why do Companies do Rebates?
- How Are Rebates Treated in Accounting?
- What is One Advantage to Consumers of a Rebate Offer?
- How to Become a Rebate Processor
- What is an Example of a Rebate?
- What Are Some Popular Rebate Examples Used by Organizations?
- What is The Difference Between a Discount and a Rebate?
- How Are Rebates Calculated?
What Are Internet Rebate Processing Jobs?
Though the term itself signifies that the job profile includes simple form processing and information computing work, a rebate job advertised on the Internet is often a far cry from a traditional rebate processing job. There are a lot of rebate jobs available on the Internet, but most of them are affiliate marketing opportunities that are cleverly offered in the illusory garb of rebate processing.
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There are several sites that will claim to offer you true rebate processing opportunities at a nominal price, only to end up offering you an amateur tutorial about picking up products from affiliate marketing sites like Clickbank, Commission Junction, etcetera, and selling them for a commission.
There are a few good companies that for a onetime fee offer you great value and access to several marketing sites, software tools and great tips for making valuable commissions, however, most of them offer zilch value and no support and assistance to make any real money for you.
A real rebate processing job can offer decent returns and the opportunity to literally work in your pajamas from the comfort of your home. In addition to this, the actual job is quite simple and doesn’t really require intricate effort. You can easily track the amount you have made at the end of the day.
How to Make Money With Rebate Processor Jobs
With an internet connection and a computer, you can work and monitor your earnings where ever you are. It is so easy to make money with rebate processor jobs.
Register With A Few Companies
Go online and register with companies that are looking for rebate processors for free. Log in to your own account to access the online forms. Complete the information required on these short forms such as the amount of the rebate, who receives it and the company the product was bought from. After you have done this, you will receive your check after a few days.
Join A Membership Site
You can also join a membership site in order to learn more about processing rebates. These sites will teach you all that you need to know but you have to pay a very small membership fee. As soon as you have done that, you can log into the page using your user name and password. You can then begin to enjoy the benefits that comes with the membership.
Other ways
You can visit retail stores like Walmart and Best Buy and offer to process their rebates for them. You may be lucky to be accepted. You may be surprised to find out that a few of them may be hearing about such a service for the first time, so be sure to explain it to them.
After you have gained some experience, you can apply to big rebate processing companies who are usually contracted by large retail companies. Use job databases such as CareerBuilder.com to search for genuine jobs.
How to Apply For Rebate Processor Jobs
Do thorough research on the Internet and go through several forums, community boards, discussion threads and social networking sites to zero down on a legitimate work-from-home rebate processing program. Typically misleading claims will be ‘thousands of companies require rebate processors ‘or ‘make $ 100-$ 200 an hour by simply filling and submitting easy forms’. Whenever the rewards seem unusually disproportionate to the effort and skills required, there is always a hint of a potential money making scam.
A true rebate processing job doesn’t require you to market or promote the company’s products, but simply process forms administratively and be paid a nominal sum for every processed document. There aren’t any sales, commissions or clicks to keep track of. It is very difficult to find genuine rebate processing jobs on the Internet, but if you look through specialized, administrative work-at-home communities and forums, you may find them.
The best way to go about it is to find local companies that are looking for online rebate processors. They may not boast of an excellent pay, but you won’t have to pay them an upfront fee unlike other online rebate processing jobs.
What Are The Compensation For Rebate Processor Jobs?
A traditional rebate processing job requires a flair for precision and an eye for detail to avoid committing the minutest errors. Since the job is highly administrative and monotonous with minimal scope for creativity, attributes like patience, diligence and a hard-working disposition are crucial. A real rebate processing job can pay anywhere between $ 5- – $ 20, and even more, depending on the company (per processed form).
An online rebate processing job may often be starkly different from what it is projected to be, and hence it is critical to thoroughly scrutinize the available opportunity, and check factors like initial investment, compensation and conditions for earning the compensation.
Hundreds of rebate processing jobs offered on the internet are nothing more than affiliate marketing tutorials that give you information on earning commissions by promoting other’s products.
What Does a Rebate Specialist do?
This position is responsible for managing day-to-day operations for manufacturer invoicing and working directly with manufacturers to resolve any issues. Will remain up-to-date on current processes and concerns. Will be required to consistently meet established timeliness for service level agreements and quality objectives.
- Work independently on tasks
- Interact with the purchasing, marketing and finance departments as needed
- Excellent employee, vendor and customer communication skills
- Proficient with MS Office products and working knowledge/understanding of ERP/MRP systems and their use in logistics environment
- Expertise in MS Excel and ability to use BI tools
- Maintain and update pricing data schedules and databases as needed
- Accurately calculate and follow-up with rebates both in the ERP system and through external reporting
- Monitor sales contracts to validate correct vendor cost and sales margin
- Track rebates
- Evaluate vendor performance by regularly reviewing all aspects of deliverables
- Attend seminars, meetings or educational activities to stay up-to-date on the latest developments, trends, and regulations in the marketplace
- Perform other work-related duties as assigned
What is a Rebate in Procurement?
Put simply, a rebate is the return of part of the original purchase price for goods or services, made by a seller to a buyer, usually honoured when certain conditions are met – such as when the volume of goods purchased crosses a certain threshold.
If you know you are going to be ordering large quantities of goods from a particular supplier over the course of the year, you have strong bargaining power to negotiate a good rebate deal that will yield additional income for your organization further down the line. This additional revenue from supplier rebate programmes can have a significant impact on your organization’s bottom line.
The important thing to know about supplier rebate programmes is that they are usually tiered. For example, if you buy 100-250 units you get a 2% rebate. If you buy 250-500, you get a 4% rebate. If you buy 500-750 units, you get a 6% rebate and so on. With these targets in sight, you can communicate and collaborate with the sales team to make sure your organization hits them – further boosting profitability and demonstrating even more value from the procurement function.
Entering into rebate agreements is also a great way to foster mutually successful partnerships with suppliers, engage in joint business planning initiatives and strengthen relationships.
How Do Rebates Work?
Rebates are a retrospective payment which ultimately reduces the overall cost of a product/service at a later date. This makes rebates different to discounts, as you pay the bill for the full amount then, at some point later in time, part of the amount may get returned to you. Often certain conditions may have to be met in order to get rebates such as volume-based, special pricing agreements (SPAs) or claim-backs.
Earnings or payments from rebate deals can form a very significant proportion of a company’s profit margin. Rebates are commonly used as an incentive, to build loyalty and improve sales and market share.
A wide range of industries including building supplies, electronics, retail and wholesale distribution regularly offer rebates based on certain locations, products or product groups and on certain types of transaction. This means that the rebates can get rather complex.
Rebate example
Rebate agreements can take many complex forms, as they are often designed to cater to the specific sales strategies of the individual trading partners involved.
A simple example of a rebate is a volume incentive, where a customer could receive a rebate for buying a certain volume of a certain product over the life of the deal. For example, an annual rebate agreement might state a 5% rebate, conditional on purchasing over 1,000 units of a product costing $100.
This would trigger a rebate payment of $5 per unit to the customer, as long as they purchased over 1,000 units throughout the year, effectively reducing the price paid for the product to $95 retrospectively.
These kinds of rebates are often tiered. For example, if you purchase 1,000 units, you may earn a 5% rebate, but if you purchase 2,000 units you could earn a 10% rebate and so on.
What Are The Types of Rebates?
Rebates can be a creative way to boost sales. As such, there are different types of rebates. Here are a few commonly used rebate setups:
1. Volume Incentive Rebate
One of the most common types of rebates is a volume incentive rebate. This rebate protects vendors in the event that they don’t end up selling as much as they had hoped. Buyers receive rebates only once they’ve hit volume-based turnover targets (i.e. bought a certain amount of product in a given amount of time).
2. Value Incentive Rebate
As opposed to calculating rebates based on pure volume, a value incentive rebate is achieved when buyers reach value-based turnover targets (i.e. a certain dollar amount has been reached).
3. Product Mix Incentive Rebate
If you’re a vendor who is looking to diversify the types of products your customers are buying from you, then a product mix incentive rebate may help. The goal would be to win the business from your customer over competitors. For example, you might offer a rebate for TVs under the condition that the customer also purchases computer equipment from your business.
4. Supplier Rebates
Businesses can sell products or services with supplier rebates. In this case, the supplier will provide the money back to the customers. From a business’ perspective, both your expenses and costs of goods sold will be reduced from this kind of rebate.
Supplier rebates can come into play in different contracted ways. Let’s look at these supplier rebate examples:
- A supplier might offer rebates only to businesses that make purchases over a certain dollar amount.
- Suppliers can offer rebates to vendors that fulfill a target percentage increase in the number of products sold.
- Suppliers can provide end-user rebates, in which case the customer has to apply for a rebate directly on the supplier’s channels, rather than the vendors.
How do You Negotiate a Supplier Rebate?
Establish rebate deals by starting a conversation with the vendors on your list. Vendors are more than happy to discuss the terms of your agreement. Approach this by explaining the parts of the deal you’re happy with, as well as what you’d most like to change. Ask your supplier to do the same. Again, profitability depends on healthy relationships, so keep this in mind as you head to the bargaining table.
To understand where your suppliers fit on the matrix, begin by classifying your purchases according to risk.
Supply risk is high when the material is scarce or its availability could be at risk due to an unstable political climate or a natural disaster that wipes out delivery options. Or, it could be that there are very few suppliers that have this one thing.
Profit impact is high when the item adds significant value to your business model. This could be because it makes up a large percentage of output (it’s a part or material used in most of your products) or because it has a high impact on quality.
Run through your list of suppliers and ask, is there a scope for leverage here? Work your way through the following steps to narrow your list of leverage suppliers:
- Prepare portfolio analysis.
- Assess criteria for profit impact and supply risk.
- Determine the extent of this analysis.
- Fill in the matrix — we recommend rating suppliers on a one-to-ten scale, assigning each vendor a score for profit impact and risk.
- Analyze results.
- Work with internal stakeholders to develop a purchasing strategy — what are your rebate goals, price targets?
- Which areas need improvement?
Those that fall in the low-impact or bottleneck category won’t provide much value in terms of securing rebates. Bottleneck items require a strategy aimed at ensuring supply and maintaining costs. Noncritical items are low risk and have little impact on profit. In these cases, it doesn’t make sense to pursue rebates or discounts, as they won’t do much for your bottom line.
Why do Companies do Rebates?
Companies count on the consumer to forget to mail in the rebate. Very often there are very tight guidelines to make sure the mail in rebate is postmarked by a certain date. We lead busy lives and it’s easy to forget to mail in the rebate, especially if we purchased the product regardless if there was a rebate at all. According to national statistics, less than 40% of consumers actually take advantage of rebates. This is especially true for rebates that are only for a few dollars.
Your rebate may not actually be cash back, but store credit. This allows the company to gain even more business once you receive the card in the mail. They rely on your next visit to purchase even more than what the card is valued at. It’s a win win for them. These are starting to be more common in our current economy. Any way to bring in business is welcomed.
Rebates often ask for many pieces to fulfill the rebate, which if not followed, could lead a denial of a rebate. Did you include the UPC? How about the original receipt? What about making sure you purchased the product during the specified time? It’s not uncommon that the wrong item was purchased and it’s probably too late to return item after you hear back from the manufacturer.
Most likely when sending out your rebate, you can become victim to your information being sold to third parties. Sometimes rebates will explicitly say that your information won’t be sold, but you still could get mailings from the company in the future. Also, it allows them to gain insight on the purchaser for further marketing promotions and research. Of course, sometimes getting additional coupons in the mail for new products isn’t a bad thing.
To ensure the product is kept and used. Most of the time, a store will not return a product without a UPC in tact or an original receipt. There are exceptions to the rule, but where I worked we were not allowed unless it was exchanged for the exact same product. Of course a common practice is to buy a product, send off for the rebate and sell the product on eBay.
It’s an easy tool to draw people in to make a purchase. They let the store, such as Buy.com or Staples to do their marketing for them. Usually deals with rebates are always on the stores hot list to get people in the store. Getting the consumer in the door for one thing will ultimately lead to further purchasing. You buy a printer and now you need to buy a cable too!
It takes a long time, for the most part, for manufacturer’s to send out the rebates. It’s very typical for the fine print to read that it takes 9 – 12 weeks to receive the rebate. This allows the company to hold the money longer to earn extra interest before having to release their funds. While it may not seem like much, after thousands of units are sold, it could become substantial. Also, rebates are typically handled by third parties, so there is additional processing time that could result in a delay of a rebate.
How Are Rebates Treated in Accounting?
Sales rebates pay the customer back for the sale. The rebate could be for some or all of the purchase. The rebate has a cash value, because it is given to the customer after the purchase, though it is sometimes treated as a coupon – for example, when rebates are given at the register. The key difference is that a coupon discounts a price, while a rebate refunds part of the full price back to the customer.
Rebates paid for by the supplier are accounted for as a reduction of the cost of goods sold (COGS). For example, a car dealership sells a car that has a $200 factory rebate. The dealership isn’t reducing the price of the car. The customer is getting money from the manufacturer that made the product. To the dealership, this is a reduction in the wholesale purchase price of the car. In this case, the reduction also reduces the depreciation cost of the car.
Coupons are discounts on an existing or future purchase. The accounting for this often depends on when the money is likely to be given to the company. A coupon that discounts the price immediately at the time of purchase is recorded as a reduction in revenue. For example, if a 10 percent coupon is given on a $20 purchase, the recorded revenue is $18 ($20 x 10% = $2 discount).
If the coupon is given for the next purchase, the full revenue of the immediate purchase is recorded. There is no discount to COGS, and the coupon only reduces revenue if it is used at a later purchase. Until the coupon actually reduces a sales price, it isn’t accounted for on the books because there is no guarantee it will be used.
What is One Advantage to Consumers of a Rebate Offer?
Rebates are widely used by all manner of businesses and manufacturers to stimulate interest in their services and products. They are different from straight discounts or coupons, as the benefit occurs after the sale instead of at the time of purchase. The amounts are similarly wide-ranging, from a dollar on low-priced consumer goods to thousands of dollars for cars and trucks. Companies also use rebates to sell overstocked or slow-selling items.
Consumers find rebates to be a tangible benefit, and they can enhance the shopping experience. Another advantage is that the Internal Revenue Service considers rebates price reductions rather than income, so these transactions are tax-free.
Manufacturers are continually drawn to use rebates as sales inducements and to increase visibility. Retailers like them because they help move merchandise and require no extra work on their part.
Manufacturers realize that many people will not follow through with the rebate process, so the initial enticement that may motivate a purchase often does not cost the manufacturer anything. According to USA Today: “On small items, actually retrieving the savings doesn’t, for many, outweigh the time and effort required.
An item advertised at $2.49 after a $1 rebate is really $3.49 at checkout. To get the dollar back requires the paperwork, plus 37 cents or more to mail it in. But even with a higher-priced item, such as a $150 inkjet printer after a $50 rebate, redemption is nowhere near 100 percent.”
How to Become a Rebate Processor
There are many work-at-home offers out there. They advertise on television, radio, home mailings, magazines and on the Internet. Many offer high paying salaries with minimum work. One such offer is for a position entitled “rebate processor” where you can earn hundreds of dollars a day processing rebates. Unfortunately, most rebate processing jobs are scams and many folks have lost a significant amount of money pursuing these kinds of opportunities.
Know work-at-home scams exist. Even if the website seems professional, the people in the pictures look honest, and the testimonials sound legitimate, it still could be a scam. If you need to initially pay money upfront to receive a starter packet or equipment, or even pay for a processing fee, this should be a sign the company could be a scam and you need to do your research.
Visit the Better Business Bureau and your state’s Attorney General’s office. You can also check with your local consumer protection agency (See Resources below). Do this before you pay out any money for a job opportunity.
Know about rebate processing scams specifically. Rebate processing jobs that advertise you can earn hundreds of dollars a day are not data processing jobs like one might think. Rather, you will actually learn how to do affiliate marketing, which means you are selling someone else’s product for a commission. With “rebate processing” jobs in particular, you pay a fee for a kit or information of some sort where you learn how to successfully market various products that have a rebate offer.
Someone buys a product from one of your advertisements and you earn money. In reality, not only do you pay for the initial information on how to do this, you have to pay for your own advertising. In the end, you could make money, but you also could lose a lot, too.
Know about real rebate processing jobs. There are actually jobs out there where you can process rebates, some from home. This is the real deal. You check UPCs to see if they match up and do some data entry. These jobs do not pay hundreds of dollars, but rather something like $0.15 per rebate or an hourly salary at or just above minimum wage, in essence, a pay rate in line with typical data processing work.
Find real rebate processing jobs. There are several job databases that you can search like CareerBuilder.com, but also, check out some websites dedicated to sorting out real jobs from scams like Scams.com where people post their findings and experience on different companies.
In addition, apply for large rebate processing companies who are contracted by large retail companies. Two such rebate processing companies are Continental Promotions Group (CPG), which processes rebates for companies like Lowe’s, and Parago, which processes rebates for companies like Staples.
What is an Example of a Rebate?
A rebate is a form of cash back against the purchase of the goods given to the buyer by the manufacturer or the seller of that respective goods after they sell them. From the sellers’ point of view, it helps them attract more buyers for their goods.
Sometimes, the buyers lose the receipt of payment which prevents the seller from paying the rebate. On the other hand, from the buyer’s point of view, it acts as an incentive or a cashback against their purchases which is a profit.
Suppose a store named YZ selling widgets is giving a flat 5% rebate on the widgets’ purchase. A buyer, Mr. X, purchases a widget pricing $10,000. When he purchases that widget, he is provided with a 5% instant rebate receipt. The widget price was $10,000, but the 5% instant rebate costs $9,500, and Mr. X earns a profit of $500 on his purchase.
Let us see what shall be the invoice cost in this case.
Invoice Cost can be calculated as follows –
Invoice Cost = Product Cost- Instant Rebate Amount
- = $10,000- $500
- Invoice Cost = $9,500
What Are Some Popular Rebate Examples Used by Organizations?
1. Volume Incentive Rebate Example
Volume rebates are perhaps the most common rebate example, designed to incentivise higher order volumes, while protecting you, as a vendor, from buyers over-promising during purchase price negotiations. With volume rebate agreements, your buyers earn rebates only when volume-based turnover targets have been reached.
For example, a volume deal could have incentive targets of 100 units, 500 units and 1,000 units where the invoice price for each unit is £100. Here, each tier of this volume deal equates to buyers earning incremental per-unit rebate rates:
| Sales | Rebate |
| 100-499 | £2.00 |
| 500-999 | £4.00 |
| >1,000 | £6.00 |
In all cases, you would invoice the buyer £100 per unit. Then, at the end of the agreed time period, you measure the buyer’s actual purchases and issue a rebate to the calculation based on volume as outlined in the table above. So, if the total quantity of sales was 750 units, the rebate would be 750 x £4.00 = £3,000.
2. Value Incentive Rebate Example
As well as volume incentive rebates there are value incentive rebates. Rather than being based on volume-based turnover targets, your buyers can earn rebates when value-based turnover targets are reached. For example:
| Sales | Rebate |
| £1,000-£4,999 | 2.0% |
| £5,000-£9,999 | 4.0% |
| >£10,000 | 6.0% |
So here, if total sales were £7,500, then the rebate would be £7,500 x 4.0% = £300.
3. Growth Incentive Rebate Example
As the name implies, growth incentive rebates are issued when buyers meet certain growth targets, such as when their spend has grown by a certain volume, value or percentage above a specified baseline.
For example:
| % Growth Value Over Previous Year | Rebate |
| 2% growth | £1,000 |
| 4% growth | £2,000 |
| 6% growth | £4,000 |
4. Product Mix Incentive Rebate Example
As a vendor, you may wish to encourage your buyers and distributors to make purchases across a wider range of products than they currently do. The strategy here is to try and win the buyer’s custom from other suppliers for other product lines.
For example, let’s say you supply tyres for all types of vehicles, but a buyer only buys car tyres from you and tends to get their motorcycle tyres from a different supplier. Here, a product mix incentive rebate can be applied to their regular order of car tyres on the condition that they buy motorcycle tyres from you as well.
Again, pricing can be tiered to encourage greater volume or value of purchases. For example:
| Sales of Product X | Rebate on Product Y |
| 100-499 | £2.00 |
| 500-999 | £4.00 |
| >1,000 | £6.00 |
5. Product Level FOC Rebate Example
Rebates don’t necessarily have to be issued in cash. Depending on your marketing strategy and the needs of the buyer, you can also offer products free of charge (FOC) instead. For example, if the buyer buys X number of units, they get Y number of the same unit for free.
Of course, product level FOC rebates can also be tiered to encourage greater purchases. For example:
| Sales | FOC % |
| 100-499 | 5.0% |
| 500-999 | 10.0% |
| >1,000 | 15.0% |
So, if total sales were 750, FOC is calculated as 10% of 750 units, i.e. 75 units are given as FOC on top of the 750.
6. Buy X, Get Y Free Rebate Example
This is a variation on the product level FOC rebate, which you may, for instance, find useful for end-of-life sales promotions – for example, if an old version of a product is being phased out to be replaced by a new version.
Though you may of course try to use extra volume-based rebates to ship as much of your remaining stock to your usual buyers as possible, you could also use buy X get Y free rebates as a strategy to ship your surplus to other buyers who wouldn’t normally have bought the product line.
However you choose to use them, buy X get Y free rebates can be tiered.
| Sales of Product X | Product Y Free |
| 100-499 | 5.0% |
| 500-999 | 10.0% |
| >1,000 | 15.0% |
Here, if total sales of product X were 300, then the buyer would get 300 x 5% of product Y for free – so 15 units of product Y are given free of charge.
7. Standard Percentage of Turnover Rebates, and Standard Value Per Unit Rebates
Sometimes the best sales promotion is the simplest. For example, if you’re trying to attract new customers, then offering standard rebate rates can be useful in your marketing strategy. These will generally take one of two forms – standard percentage of turnover rebates, or standard value per unit rebates. These rebates are not in any way based on incremental growth in orders – instead, a standard rebate is issued no matter the volume purchased.
- Standard % of Turnover – Basic % rebate calculation, e.g. £1,000 x 2.5% = £25 rebate
- Standard Value Per Unit – Basic £ rebate per item purchased, e.g. 5 x £2.50 = £12.50 rebate
What is The Difference Between a Discount and a Rebate?
The rebate is a particular kind of discount or say partial refund of the product price by seller to the buyer, allowed to those customers whose purchases reach the specified volume or quantity. Whenever, people get a reduction in the price at the time of purchases, it is a discount, but in reality it is rebate. So, every customer and seller, must be known about the differences between discount and rebate.
Definition of Discount
The concession allowed by the seller to the buyer on the par value of the invoice is known as Discount. It is given on the gross amount of the product, and the buyer has to pay the net amount of it which is equal to gross amount less discount.
Discount is allowed to all the customers, to induce them to make earlier payments or to make payments within a short period. Sometimes, it is provided to increase sales volume or to reward the old customers. There are two types of discount:
- Trade Discount: The discount which is allowed on the list price is known as Trade Discount. It is given to all the customers, whether they are making credit purchases or cash purchases. It is allowed to the customers to encourage sales in large quantities. The rate of discount varies according to the order placed by the customers.
- Cash Discount: The discount which is allowed to the customer only if he makes a cash payment for the items purchased is known as Cash Discount. It is granted only to the customers who makes immediate payment. The discount is shown in the books of accounts.
Definition of Rebate
The rebate is a type of allowance provided to customers on goods purchased as a deduction in the catalogue price and to the assessee for tax paid or to the tenant for rent paid for the amount paid more than the amount needs to be paid.
The rebate is allowed to customers, when their purchase in quantity or in value, reaches a specified limit. The amount returned to the buyer by the seller, at the time of making complete payment for the purchases is known as a rebate. It is a tool used by the sellers to promote sales in large quantities. The amount of rebate provided to the buyer is pre-decided by the seller.
The rebate is also allowed to the assesses if they pay taxes more than the amount to be paid. It is the money refunded by the tax authorities to the assessee. Similarly, in the case of rent and utility bills, the rebate is allowed.
Key Differences Between Discount and Rebate
The following are the major differences between discount and rebate:
- The discount is a reduction in the face value of the goods allowed to the customers for making payment in stipulated time or purchasing products in big lots. Rebate, on the other hand, is a special kind of discount allowed to the customers when the purchases made by the buyer crosses the defined limit, in the specified period.
- The discount is a marketing strategy, but Rebate is a sales strategy.
- Discount is allowed when the payment is made in time, whereas rebate is allowed when the full payment is made to the seller for purchases.
- Discount is available to all the customers. Conversely, Rebate is available to those customers who fulfil the specific criteria.
- Discount is given for each item purchased by the customer; however, the rebate is given as a deduction in the list price provided the required conditions are satisfied.
How Are Rebates Calculated?
An income tax rebate can simply be understood as a form of refund on taxes that you receive from the Income Tax Department under certain circumstances. An individual is liable to receive a tax rebate in the event that he or she pays more taxes in a financial year than they owe to the government. In order to avail a tax rebate, you must make sure to accurately compute your tax liability and file your income tax returns within a particular time period.
As per Income Tax Section 87A, you can claim a rebate of ₹12,500 on your tax liability. Here are the steps involved to claim this 87A rebate:
Step 1. First, compute your gross total income in the previous financial year
Step 2. From this, subtract all the tax deductions that you have claimed for tax saving investments
Step 3. Now, you’ve arrived at your Gross Total Income after tax deductions. This is your taxable income for the financial year (or previous year)
Step 4. Estimate your gross tax liability on the Gross Total Income, but do not add cess to the amount
Step 5. You can claim the 87A rebate on your gross tax liability before cess and arrive at the net tax liability
In case your total income is below ₹5 lakhs, the maximum rebate under section 87A for the AY 2020-21, i.e. ₹12,500 shall bring down your net tax liability to zero.
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Here is an example to show how rebate under section 87A can be calculated for an ordinary individual resident taxpayer for FY 2019-20:
| Sources of income (FY 2019-20) | Income (₹) |
| Gross total income | 6,50,000 |
| Less: Deduction u/s 80C | 1,50,000 |
| Total income | 5,00,000 |
| Income-tax (at 5% from ₹ 2.5 to 5 lakh) | 12,500 |
| Less: Rebate under section 87A | 12,500 |
| Net Tax payable | Nil |
Here is the table showing the Maximum Tax Rebate Allowed under Section 87A for Previous Financial Years:
| Financial Year | Limit on Total Taxable Income (₹) | Amount of rebate allowed u/s 87A (₹) |
| 2021-22 | 5,00,000 | 12,500 |
| 2020-21 | 5,00,000 | 12,500 |
| 2019-20 | 5,00,000 | 12,500 |
| 2018-19 | 3,50,000 | 2,500 |
| 2017-18 | 3,50,000 | 2,500 |
| 2016-17 | 5,00,000 | 5,000 |
| 2015-16 | 5,00,000 | 2,000 |
| 2014-15 | 5,00,000 | 2,000 |
| 2013-14 | 5,00,000 | 2,000 |
How is Income Tax Rebate Calculated?
To calculate the rebate:
1) Calculate Gross Income – Add up income from all sources like salary, capital gains, house rent and income from other sources.
2) Find the Net Taxable Income – Apply deductions under Section 80 to your gross income, as applicable.
3) For net taxable income equal to or less than Rs.5 Lakh, you can claim rebate under Section 87A.
The tax rebate offered under Section 87A can prove to be a great relief to various citizens across the country. However, here are a few points of note that a taxpayer must keep in mind before thinking about saving income tax in India under Section 87A:
1. This tax rebate under Section 87A cannot be availed by Non Residential Indians, which is NRIs.
2. The benefits of this tax rebate can also not be availed by Corporations, Firms or HUFs.
3. While seniors (aged 60 to 80) can avail this tax rebate, Super Seniors (aged 80 and above) cannot.
The tax rebate offered under Section 87A is certainly a useful means of saving income taxes in India during a financial year. However, it is just important to save taxes with crucial investments such as a life insurance policy that is both tax-saving and financially fruitful.
