ITR utility glitch: Are assessees with income up to ₹7 lakh forced to pay tax?

livemint.com:

₹5 lakh do not have to pay any income tax in both old and new tax regimes. She proposed increasing the rebate limit in the new tax regime, under which persons with income up to ₹7 lakh will not have to pay any tax. The updates to Section 87A of the Income Tax Act aimed to make taxpayers with a total taxable income of up to ₹7 lakh eligible for a rebate equivalent to their tax liability, capped at ₹25,000.

As per the existing provisions of the Income Tax Act, a rebate under section 87A is available in respect of all taxpayers' incomes taxable at normal slab rates or at special rates, except the income in the nature of long-term capital gains (LTCG) on equity instruments, which is taxable at a special rate of 10%. To understand the rebate benefit under section 87A, let's consider an example. In the fiscal year 2023-24, if a person earns a monthly salary of ₹40,000 along with a short-term capital gain (STCG) income of ₹1.20 lakh and a long-term capital gain (LTCG) income of ₹1 lakh from the sale of equity shares, their total taxable income would be ₹7 lakh.

They would receive a rebate of ₹9,000 on their total salary income and a rebate of ₹16,000 on their STCG income under section 87A of the Income Tax Act. However, they would have to pay a tax of ₹10,000 on their LTCG income, even if their total income is up to ₹7 lakh only. After July 5, 2024, the return filing utility in the Income Tax department's e-filing portal started calculating rebates under section 87A incorrectly.

This was due to an incorrect interpretation of the law. The new utility excludes all incomes taxable at special rates, including STCG income on equity instruments taxable at a special rate of 15%, while determining the threshold income limit of Rs. 7