Good news: Soon income tax dept to correct ITR-2, 3 forms to allow eligible taxpayers to claim 87A tax rebate for FY 2023-24
The Income Tax Department has announced good news for taxpayers who are eligible to claim section 87A tax rebate for FY 2023-24 but were unable to claim it. The tax department has announced this relief on the income tax return (ITR) e-filing portal late night on December 31, 2024. As per the announcement eligible taxpayers will be able to soon file a revised or belated income tax return to avail section 87A tax rebate either through the ITR filing utility or online on the e-filing portal. This relief follows the interim judgement by Bombay High Court directing the tax department to extend revised and belated ITR filing deadline for eligible taxpayers to claim 87A tax rebate.#sr_widget.onDemand p, #stock_pro.onDemand p{font-size: 14px;line-height: 1.28;} .onDemand .live_stock{left:17px;padding:1px 3px 1px 5px;font-size:12px;font-weight:600;line-height:18px;top:9px} #sr_widget.onDemand .sr_desc{margin:0 auto 0;} #sr_widget.onDemand .sr_desc{color: #024d99;margin-top:10px;} #sr_widget.onDemand .crypto .live_stock .lb-icon{8px 6px 5px 3px !important} #sr_widget.crypto.onDemand a.text{border-bottom:1px solid #ccc;padding-bottom:5px;display:block;width:100%} #sr_widget.onDemand .sr_desc .text p, #stock_pro.onDemand .sr_desc .text p{font-size:12px;font-weight:400;}
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The necessary back end software related changes in the online ITR form will be made shortly to give effect to this (87A rebate claim). Under section 87A of the Income Tax Act, 1961, eligible taxpayers can claim tax rebate up to Rs 12,500 under the old tax regime and up to Rs 25,000 under the new tax regime.
“The updated utilities for ITR forms 2 and 3 giving effect to the Circular No. 21 dated 31st December 2024 and including the option to update 87A rebate will be made available shortly,” said the Income Tax Department on the e-filing ITR portal on December 31, 2024.
Soon option to claim 87A tax rebate by filing revised/belated ITR-2 or ITR-3 form will be enabled
The back end changes will be made only for ITR-2 and ITR-3 form as the ITR e-filing utility since July 5, 2024 not allowing 87A tax rebate claim against any special rate incomes to an individual like Short Term Capital Gains (STCG). Chartered Accountants reported at that time that many taxpayers who had filed ITR using the e-filing portal post July 5, 2024 and claimed a tax rebate in the ITR which had special rate incomes also were sent tax notices later on. ITR-2 and ITR-3 are the only ITR forms where an individual can offer his capital gains income for tax.Chartered Accountant Ashish Niraj, partner, A S N & company, says, “This news flash from the tax department means now eligible taxpayers can claim 87A tax rebate through filing a revised or belated ITR through the utility or online web based ITR filing facility (e-filing portal) soon. To give effect to this change the utility software of the specific forms where capital gains taxation income can be offered (ITR-2 and 3) will be updated. The circular (circular number 21/2024) from the department released yesterday only mentioned that the revised and belated ITR filing deadline has been extended for all resident individual taxpayers.”
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Income Tax ITR PortalRevised and belated ITR deadline extended for all taxpayers?
Only resident individuals have got the benefit of the extended deadline to file revised or belated ITR.The Income Tax Department in a circular dated December 31, 2024 said: “The Central Board of Direct Taxes ('the CBDT'), in exercise of its powers under section 119 of the Income-tax Act,1961 ('the Act'), extends the last date for furnishing belated return of income under sub-section (4) of section 139 of the Act or for furnishing revised return of income under sub-section (5) of section 139 of the Act for the Assessment Year 2024-25 in the case of resident individuals from 31 st December, 2024 to 15th January, 2025.”
What did the Bombay High Court say about the ITR filing deadline extension?
Bombay High Court said that its final judgement about the denial of 87A tax rebate case will come on January 9, 2025 and hence as an interim relief to taxpayers the revised and belated ITR filing deadline must be extended.In an order dated December 20, 2024, Bombay High Court said: "“…By way of interim relief, the respondent, Central Board of Direct Taxes is hereby directed to forthwith issue requisite notification under Section 119 of the Act extending the due date for e-filing of the income-tax returns in relation to the assessees who are required to file a return of income by December 31, 2024, at least to January 15, 2025. This extension is to ensure that all taxpayers eligible for the rebate under Section 87A are afforded the opportunity to exercise their statutory rights without facing procedural impediments.”
Chartered Accountant Himank Singla, partner, SBHS & Associates, says: “Now, in response to the Bombay High Court Judgment and subsequent Circular No. 21 (extension Notification for due date of submitting ITR), CBDT has now clarified on the Income Tax Portal that the updated ITR Forms 2 and 3 will incorporate changes allowing the rebate to be claimed by eligible taxpayers with special rate incomes. This move ensures compliance with the court’s directives and aligns the application of tax benefits with the principles outlined in the judgment.”
What was the 87A tax rebate issue which prompted the belated, revised ITR deadline extension?
According to Anand Bathiya, president, Bombay Chartered Accountants' Society (BCAS), post July 5, 2024 the income tax return (ITR) filing utilities were not allowing the 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.According to the Bombay High Court order, The Chamber of Tax Consultants, said, "The respondents have unilaterally disabled assessees from claiming rebate under Section 87A after 5 July 2024 by modifying the utility software for filing income-tax returns. As a result, if the returns are filed by the assessees using the software of the respondents after 5 July 2024, they are unable to claim the rebate."
Singla says, “The issue revolves around the Section 87A rebate which should have allowed eligible taxpayers with a total income below a specified threshold to claim a tax rebate on their income tax liability. This rebate effectively reduces the tax payable to zero for incomes under a particular limit. However, a problem arose concerning taxpayers particularly those earning incomes taxed at special rates (e.g., capital gains, dividends, or other income taxed under specific provisions) when they claim tax rebate.”
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This story originally appeared on: India Times - Author:Faqs of Insurances
