Understanding Section 87A Rebate

Section 87A provides tax relief for individual taxpayers with taxable income below Rs. 5 lakh under the old tax regime or Rs. 7 lakh under the new regime. Eligible taxpayers can claim a rebate of up to Rs 12,500 (old regime) or Rs 25,000 (new regime), potentially reducing their tax liability to zero.

Challenges Faced by Taxpayers

While filing income tax returns (ITR) for AY 2024-25, many taxpayers encountered difficulties claiming the rebate under Section 87A for income taxed at special rates, such as short-term capital gains. Despite their total taxable income being below Rs. 5 lakh (old regime) or Rs. 7 lakh (new regime), they ended up paying taxes due to software limitations. Recently, the Bombay High Court has addressed the issue faced by the taxpayers.

To support the taxpayers, the Income Tax Department has extended the deadline for filing revised Income Tax Returns (ITR) to January 15, 2025, aiming to resolve the challenges caused by software updates and allow taxpayers to claim the benefits of Section 87A rebate. Taxpayers who missed claiming the Section 87A tax rebate for the assessment year 2024-25 due to software limitations after July 5, 2024, now have the opportunity to revise their returns and claim the benefit. To facilitate this process, the Income Tax Department has released updated utilities for /TR Forms 2 and 3 and has announced plans to launch an HTML utility soon, ensuring a smoother and more efficient filing experience.

Steps to Avail the Rebate

Taxpayers can use the updated /TR utilities, which include editable columns for manually entering and claiming the rebate. On validating and e-verifying the return filed enables the CPC to process the return filed.

Don't miss this opportunity to revise your returns, claim your entitled rebate, and reduce your tax liability.