No Section 87A tax rebate despite ITR filing forms being updated recently: How to claim Section 87A tax rebate with deadline ending on January 15, 2025
The Income Tax Department updated the income tax return forms for ITR-2 and ITR-3 on January 4, 2025. The ITR forms have been updated to allow the taxpayers to claim Section 87A tax rebate on short-term capital gains on equity, which they were denied during the July ITR filing. However, despite the income tax e-filing accepting the claim, the income tax department is rejecting the Section 87A rebate. This rejection is happening at the time of processing the ITR because the software linked for processing the ITR forms has not been updated. Under section 87A eligible taxpayers can claim up to Rs 25,000 tax rebate under the new tax regime. Under the old tax regime up to Rs 12,500 tax rebate can be claimed by eligible taxpayers under section 87A.#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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There is no use in filing a revised ITR to claim Section 87A tax rebate, if eligible, as the ITR is going to get processed with the same logic as of July 5, 2024. If you recall post July 5, 2024 the logic of ITR processing software was changed to prevent eligible from claiming 87A tax rebate if special rate income like short term capital gains existed in the ITR. The last date to file revised and belated returns for FY 2023-24 (AY 2024-25) has been extended to January 15, 2025, from the original deadline of December 31, 2024.
Read on to know how eligible taxpayers can claim Section 87A rebate by filing revised or belated returns, as the last date to file ITR is approaching quickly by using a makeshift solution offered by tax experts.
ITR forms have been updated but Section 87A tax rebate is still being denied
Multiple chartered accountants have reported that the tax utility software has been updated to allow filing of revised and belated ITR but the software logic for processing ITR is still the same as July 5, 2024. This is leading to rejection in Section 87A rebate claim.
Source: S K Patodia LLPImage showing Section 87A tax rebate is being denied on special rate incomes like short-term capital gains; Source: S.K Patodia LLP
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Chartered Accountant Abhishek Soni, co-founder, Tax2Win, says: "In our experience the excel based utility is preventing taxpayers to claim section 87A tax rebate if any special rate income like short term capital gains exist in the ITR. This is despite the fact that the ITR filing utility was updated on January 4, 2025. We are not sure why this is the case. As of January 6, 2025, 13.12PM there is no point in filing a revised ITR to claim 87A tax rebate if special rate income like STCG exists in the ITR as the excel utility is not allowing such claims."
Source: Tax2WinWe have considered normal income and short-term capital gains (111A); however, according to the latest ITR 2 Utility, Section 87A will only apply to normal income. Source: Tax2WinThe problem lies with ITR processing software which is yet to be updated
Experts say though the ITR filing forms have been updated, the ITR processing software is still stuck on July 5, 2024.Chartered Accountant Himank Singla, partner, SBHS & associates, says, "On Saturday, the Income Tax Department has updated the online and Excel-based offline ITR-2 & ITR-3, giving hope to taxpayers that the 87A rebate matter has finally been put to rest. However, on closer scrutiny, we find that the JSON schema has not been revised since July 5, 2024, leaving taxpayers unable to claim the section 87A tax rebate in their ITR filings. So, effectively the update is only for enabling Belated ITR & Revised ITR filings due to the extended due date of January 15, 2025."
The JSON schema is software logic that allows automatic processing of successfully submitted and verified ITR through the utility.
Mihir Tanna, Associate Director of S.K Patodia LLP, a chartered accountancy firm, says: "In our experience both the online and offline excel based utility is still preventing eligible taxpayers to claim section 87A tax rebate if any special rate income like short term capital gains exist in the ITR as of January 6, 2025. ITR filing utility was updated on January 4, 2025, but as appears from income tax news section, the department will further update ITR forms to allow 87A rebate."
How to claim Section 87A tax rebate before deadline ends as per tax experts
Chartered Accountant Hardik Kakadiya, President, Chartered Accountant Association Surat (CAAS) offers a makeshift solution to the problem.Kakadiya says: "As per our experience, the ITR filing forms though updated as of January 4, 2025, is still denying 87A tax rebate claims on special rate incomes like short term capital gains as of January 6, 2025. However, we have found that once an ITR is reprocessed by applying through the 'Rectification request to CPC' option on the e-filing ITR portal, the tax demand notice due to denial of 87A tax rebate in the ITR has vanished. However, this is not concrete evidence, as no proof of recall of this notice was given by the Income Tax Department and the notice simply disappeared from the e-filing portal. We have no clarity whether the tax demand notice which came due to denial of Section 87A tax rebate claim disappeared due to a glitch on the ITR e-filing portal or was actually recalled by the tax department pursuant to interim order of the Hon'ble Bombay High Court. This makeshift solution may not work for every taxpayer. However, one can try before income tax department again updates the JSON Schema to claim Section 87A tax rebate."
Image 1: Before applying for re-processing of ITR through Rectification request to CPC option
Source: Chartered Accountants Association Surat (CAAS)Source: Chartered Accountant Association Surat (CAAS)Image 2: After the re-processing request was honoured by CPC
Source: Chartered Accountants Association Surat (CAAS)Source: Chartered Accountant Association Surat (CAAS)The delay in JSON Schema update is costing taxpayers precious time to file revised ITR
The deadline to file revised and belated ITR has been extended to January 15, 2025, and its January 6, 2025 today.Chartered Accountants say there is no point in filing a revised ITR if the result is going to be the same as post July 5, 2024. CAs advise to wait for the Bombay High Court judgement which is set for hearing on January 9, 2025 to get clarity about the claim for 87A tax rebate.
Multiple taxpayers, who were prevented from claiming section 87A tax rebate post July 5, 2024, had got ray of hope when the Bombay High Court ordered CBDT to extend the revised and belated ITR filing deadline to enable taxpayers to claim the 87A rebate. Following the court's order, the Central Board of Direct Taxes (CBDT) extended the deadline and also mentioned on the ITR e-filing portal that soon the ITR software and utilities will be updated to reflect this change and allow 87A tax rebate. Though the update has happened with the ITR forms, the benefit of 87A tax rebate claim is yet to happen as seen from the JSON schema.
Chartered Accountant Prakash Hegde says: "As of January 6, 2025, 3PM we can't claim section 87A tax rebate in an ITR where a special rate of income like short term capital gains (STCG) exists despite the taxpayer satisfying the conditions for claiming 87A tax rebate. We have used the utility updated as of January 4, 2025, downloaded from the Income Tax e-filing portal website."
Source: Chartered Accountant Prakash HegdeSource: Chartered Accountant Prakash HegdeAs per Singla, the delay in updating the JSON schema has several implications:
"Taxpayers can currently only file belated or revised returns, excluding new filings that incorporate the 87A rebate.The inability to claim the 87A rebate may lead to higher tax liabilities for eligible taxpayers, causing financial strain and uncertainty."The picture below shows the root cause for denial of 87A tax rebate to many eligible taxpayers.
JSON SchemaSource: Income Tax e-filing ITR portal JSON Schema for ITR-2 downloaded on January 6, 2025Singla says: "Adding to the frustration is the lack of clear communication from the tax department. No FAQs or official circulars have been issued to clarify the status of the 87A rebate, leaving taxpayers and professionals uncertain about how to proceed. The lack of clear guidance has left tax consultants like me and other professionals struggling to advise their clients accurately. We are in the dark about the department's stand on the 87A rebate. It's unacceptable that we have to navigate such uncertainty during a critical filing period."
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This story originally appeared on: India Times - Author:Faqs of Insurances
