Income Tax Return: If you are a taxpayer, then this news can be very special for you. Let us tell you that as soon as the time of filing income tax return comes, a big question is in discussion – can the benefit of tax rebate under section 87A be availed on short-term capital gain (STCG) as well? The reason for this matter is the new ITR utility software of the Income Tax Department and some judicial decisions, which seem to conflict with each other. This is affecting lakhs of taxpayers who are confused about what they should do. Let’s know.
What does the current system say?
While filing income tax return for the financial year 2024-25, when taxpayers show STCG under section 111A, the system automatically blocks the rebate available under section 87A. On the other hand, as per the directions of the Bombay High Court, if the total taxable income is up to 5 lakhs in the old tax system or up to 7 lakhs in the new tax system, then a tax rebate should be available under section 87A. But as soon as STCG is added to your income, the software closes this rebate.
Can a rebate be availed by making a manual entry?
On the other hand, some tax experts believe that if the system does not give a rebate, then taxpayers can claim it by manually entering the amount of the rebate. According to Himan Singla (SBHS & Associates), this method is not new. Many tax professionals had adopted the same method last year as well. But then the department reversed the manual rebate, and many people were sent a new tax demand notice. In such a situation, if you are making a manual entry, then you may have to face legal consequences further.
Most people are filing returns without a rebate
Himank Singla says that 99% of taxpayers are filing returns without a rebate, which is visible in the income tax utility, but if a client is ready for a legal battle, professionals are helping in claiming a rebate through manual entry.
Rebate will be completely stopped from FY 2025-26
At the same time, Sujit Bangar, founder of Taxbuddy.com, says that for now (FY 2024-25), taxpayers have the option to claim a rebate manually, because the law allows it. But from FY 2025-26, this exemption will be completely removed; that is, if there is STCG, the benefit of the 87A rebate will not be available.
Read Here: Kawasaki Ninja ZX-6R vs TVS Orbiter EV : Performance Beast Meets Eco-Friendly Commuter
ITAT Ahmedabad’s decision
In this entire dispute, Ahmedabad ITAT (Income Tax Appellate Tribunal) gave a decision in favor of the taxpayers. He said that until FY 2025-26 starts, taxpayers can avail a rebate under section 87A despite having STCG. That is, even on short-term gains from selling shares, if your total taxable income is within the limit, you may be entitled to a rebate.