ITR Filing 2024: Taxpayers are facing a strange problem since July 5. New regime taxpayers who have booked short term capital gains are not able to claim a rebate of Rs 25,000 under section 87A. This problem started after the return filing utility was updated on July 5.
ITR Filing 2024: This month, a tax-filing utility has been updated on the income tax portal. After this, taxpayers of the new regime are being forced to give up a valid rebate of Rs 25,000 if they have made short capital gains. This is not according to the rules of the Income Tax Act, 1961. Rebate is given in income tax so that the tax burden on people with low income is reduced. Due to the reduction in tax burden, taxpayers show interest in filing income tax returns.
Confusion regarding total taxable income
In the budget presented last year ( Budget 2023 ) , the government had allowed a rebate of Rs 25,000 in the new regime of income tax if the taxpayer’s income is less than Rs 7 lakh per annum. Chartered accountants say that this confusion is happening because different meanings are being derived for ‘total taxable income’. They say that there is a need to clarify the situation in this matter.
Rebate was available till 5 July
Mayank Mohanka, founder of TaxAaram India, said, “We are seeing this special trend in the new income tax regime. People whose net income is less than Rs 7 lakh, if they have booked short term capital gains tax of 15 percent, then they are not able to claim the rebate of Rs 25,000.” The surprising thing is that this rebate was available on returns filed till July 5, 2024.
Problems after tax-filing utility updated
This problem started after the tax-filing utility was updated. This rebate is for income earned in the financial year 2023-24. Taxpayers have told Moneycontrol that taxpayers are allowed to claim this rebate despite booking short-term capital gains on returns filed till July 5. Mohanka said, “After the update of the income tax utility (July 5, 2024), we are not able to claim this rebate.”
Who can claim rebate of Rs 25,000?
According to section 111A, if the gross total income of the taxpayer is less than Rs 7 lakh, then he can claim rebate despite booking short term capital gains. Only section 112A states that if 10% long term capital gains have been claimed without indexation, then rebate under 87A will not be available. For this, a clause has been added in this section.
Understand this with the help of an example
This whole matter can be easily understood with the help of an example. Suppose Tripti has an income of Rs 6.5 lakh from salary and other sources. She has a short term capital gain of Rs 3 lakh. Since her taxable income is less than Rs 7 lakh, she should get a rebate of Rs 25,000 under 87A. But, she is not able to claim the rebate. Chartered accountants say that short term capital gain of Rs 3 lakh should not be considered as a separate income, because a higher rate of tax (15 percent) is applicable on it.
Income tax notice may come later
On the other hand, Rajesh, who has a salary income of Rs 5 lakh and short term capital gains of Rs 2 lakh, is able to claim rebate under section 87A. It seems that many taxpayers may get notices in this matter later, while taxpayers entitled to this rebate are not getting the benefit. The reason for this is that no such amendment has been made under the Income Tax Act, 1961, which claims that the taxpayer who has claimed special rate on income will not get this rebate.
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