The mental health legislation in India has evolved over the years from its emphasis on custodial care to community-based care. The Mental HealthCare Act (MHCA) 2017 significantly transformed the conceptualization of mental healthcare, adopting a rights-based stance and incorporating rehabilitation as an integral part of mental healthcare services. MHCA provides a legal framework that supports and reinforces rehabilitation for Persons with Mental Illness (PwMI), assisting them to achieve their full potential and integrating them into the community. MHCA mandates the provision of residential rehabilitation facilities such as halfway homes and supported and sheltered accommodations, and it endorses community-based rehabilitation services. Additionally, the Act mandates the involvement of families and stakeholders in the mental health review boards and state mental health authorities, which can help safeguard the rights and interests of PwMI. This article critically analyzes the implications of various MHCA provisions on the rehabilitation of PwMI.