Claimed 87A tax rebate for STCG in your ITR? You may get tax demand notice
Tax rebate under section 87A of the Income-tax Act, 1961 is a benefit that reduces the total income tax liability of an eligible taxpayer. The eligibility criteria are that the taxpayer's income should be below a set threshold and not having certain types of income. For example, one of the criteria for tax rebate under section 87A is to have an income below Rs 5 lakh (old tax regime) or Rs 7 lakh (new tax regime). However, following an update in the ITR filing utility on July 5, 2024, chartered accountants say that many taxpayers were denied the benefit of tax rebate under section 87A if they had certain special rate incomes like short-term capital gains (STCG). STCG on equity shares or equity-oriented mutual funds were taxable at 15% rate under Section 111A which was raised to 20% in Budget 2024 presented in July this year.
What is the issue that is causing such problems regarding claiming of 87A tax rebate
According to an earlier Economic Times report dated July 21, 2024, theITR filing utilities stopped allowing tax rebate under section 87A for various special rate incomes including short-term capital gains on equity shares or equity-oriented mutual funds taxable at 15% under Section 111A.
«Earlier the Income Tax Utility Software allowed filing of ITRs with rebate, but after July 5, 2024, a whole controversy arose due to change of schema of utility software by the income tax department. Pursuant to those ITRs which were filed with tax rebate are now getting intimation notices for tax demand equivalent to amount to rebate availed. Recently, more than 500 demand notices were received by members of Chartered Accountants Association Surat. Where there was a refund due, the amount of rebate was deducted from it after
