The Ahmedabad bench of the Income Tax Appellate Tribunal (ITAT) has ruled that taxpayers under the new tax regime can claim the Section 87A rebate on short-term capital gains, according to Taxscan report.
The decision in the case of Miss Jayshreeben could impact individuals whose income falls below the ?7 lakh threshold but includes such gains.
“Total income” is computed after excluding exempt income and allowing only permissible deductions such as the standard deduction for salary or pension income.
Sandeep Sehgal, Partner – Tax at AKM Global, said that despite this threshold-based relief, certain taxpayers with incomes below ?7 lakh may still not receive the rebate.
“Where the income comprises components taxed at special rates such as short-term capital gains under Section 111A or long-term capital gains under Section 112A, the current Income Tax Return utility does not allow the Section 87A rebate to the tax calculated on such income. As a result, even with total income under ?7 lakh, individuals whose earnings consist wholly or substantially of these special-rate capital gains may still face a tax liability,” he explained.
Ruling changes the conversation
According to Sehgal, the ITAT ruling provides an important precedent. “The decision stresses the importance for taxpayers to carefully examine the composition of their income before determining eligibility for Section 87A relief. If the CBDT aligns the ITR utility with this interpretation, it could bring relief to many taxpayers who are currently denied the rebate due to software restrictions,” he said.
Experts say the ruling is likely to prompt calls for clarification from the tax department. Until then, discrepancies between the legal position and the ITR filing system may continue.
Please click here to view the full story on CNBCTV18.