Section 87A Rebate Restored via ITR Utility update
Section 87A Rebate Restored- utility update disallowed rebate on Special Rate Income
The Income Tax Department’s announcement about the updated utilities for ITR-2 and ITR-3 incorporating Section 87A rebate provisions is a notable development, especially for taxpayers dealing with income taxed at special rates such as Short-Term Capital Gains u/s 111A and Long-term capital gains u/s 112.
ITR-2 & ITR-3 3 (Excel-based Utility) has been updated. However, JSON schema has still not been updated after 05.07.2024. Here are the key takeaways of Circular No. 21 (dated December 31, 2024):
- Revised Utilities for ITR-2 and ITR-3: The revised utilities are expected to simplify claiming the Section 87A rebate. These updates follow Circular No. 21 (dated December 31, 2024) and align with the Bombay High Court’s directive ensuring taxpayer rights.
- The updated utilities for ITR-2 and ITR-3 now enable taxpayers to claim Section 87A rebate on special rate income, addressing the issue caused by the earlier disallowance on July 5, 2024. The July 5, 2024, utility update had disallowed the rebate on special rate income, causing compliance challenges for eligible taxpayers. This update rectifies that issue. The updated utilities for ITR forms 2 and 3 giving effect to the Circular No. 21 dated 31/12/24 & including the option to update 87A rebate will be made available shortly.
- Revised and Belated Returns: Taxpayers can file or revise their returns using the updated utilities, benefiting from the extended deadline of January 15, 2025, as per Circular No. 21.
- Rebate under Section 87A: Available to taxpayers earning up to Rs. 5,00,000 taxable income (old regime) or Rs. 7,00,000 (new regime). Enables eligible individuals to reduce their tax liability to zero.
- Special Rates on Income: Provisions address Short-Term Capital Gains (Section 111A) and Long-term capital gains (Section 112), ensuring rebates can be claimed even for income taxed at these rates.
- Filing Extensions and Practical Benefits: Circular No. 21 extends the deadline for revised or belated returns to January 15, 2025, providing relief for taxpayers affected by processing delays. Income tax taxpayers with previously processed Income tax return’s showing demand must file revised returns to claim the benefits.
Big Update on Tax Rebate u/s 87A
The Income Tax Department had changed Excel Utility to Update the Rebate u/s 87A but it doesn’t means Department had allowed Rebate u/s 87A and that’s why the wording in the income tax portal were “The updated utilities for ITR Forms 2 and 3 to exercise the option to update 87A rebate for AY 2024-25 will be made available shortly.”
Pic 1
The Utility is calculating tax without giving rebate against special income as earlier but the tax payer can edit the rebate manually
Pic 2
Edited the Rebate amount manually to the extent of tax
Pic 3
Screenshot of earlier utility where rebate amount was non editable
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