Income Tax Exemption: From July 5, 2024, tax exemption under section 87A is not given on special rate income like STCG. Taxpayers who claimed for it were sent a notice of tax demand. Now a taxpayer from Delhi has won the case filed for hearing with the Income Tax Commissioner (Appeal) Mumbai.
Income Tax Exemption: The Mumbai Bench of the Income Tax Commissioner (Appeal) has ruled in favor of tax rebate under section 87A at special rate. CIT (A) Mumbai on 27 February 2025 held that tax rebate under section 87A is available on special rate like Short Term Capital Gains (STCG). Also, accordingly, instructions were issued to the Assessing Officer (AO) to allow it in his pending case. Let us tell you that from July 5, 2024, the Income Tax Department had deactivated the option to claim tax rebate under section 87A on special rate income like STCG on utility software.
Such people got notice
Those who had claimed tax rebate under section 87A on STCG in their ITR were later given a notice. Once you get this notice, you can either give up and pay the tax demand or approach the court.
Two such cases
There are at least two CIT (A) cases in India (Gujarat and Delhi) which have given favorable orders regarding tax rebate under 87A on STCG income. In one such case (Gujarat), the AO has already issued an effective order (OGE), which means allowing exemption under 87A on STCG. The second case is still new and it is expected that the AO will give OGE in this case as well.
The court had criticised the officials
However, when the Chamber of Tax Consultants filed a case in the Bombay High Court on the same issue, according to ET, the court had said that it would not decide whether to give 87A exemption on STCG income or not. The court decided that it would be best to let the individual issues come to the court and then it would be decided by the judiciary authorities on a case-to-case basis.
The court, however, criticised the tax officials who, in their administrative capacity, had deactivated the option to claim rebate under 87A on STCG after July 5, 2014.
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