ICAI submits Representation for Income Tax Rebate in STCG u/s 111A and LTCG u/s 112
ICAI submits need for ITR Utility Modification to enable 87A rebate for LTCG and STCG
The Direct Tax Committee of the Institute of Chartered Accountants of India ( ICAI ) has presented a case to the Ministry of Finance for permitting a rebate under section 87A of the Income Tax Act on Long Term Capital Gains ( LTCG ) taxable under section 112 and Short Term Capital Gains ( STCG ) taxable under section 111A. Rebate under the Income Tax Act The rebate under section 87A of...
The Direct Tax Committee of the Institute of Chartered Accountants of India ( ICAI ) has presented a case to the Ministry of Finance for permitting a rebate under section 87A of the Income Tax Act on Long Term Capital Gains ( LTCG ) taxable under section 112 and Short Term Capital Gains ( STCG ) taxable under section 111A.
Rebate under the Income Tax Act
The rebate under section 87A of the Income Tax Act is a provision designed to help residents reduce their tax liability. Under the Old Tax Regime, this rebate is available to individuals whose income does not exceed ₹5 lakhs, effectively nullifying their tax liability if they claim the rebate.
In the New Tax Regime, the rebate amount under section 87A was increased from ₹12,500 to ₹25,000, applicable to individuals with an income not exceeding ₹7 lakhs.
The Issue
On July 5th, the Income Tax Return (ITR) online utility was updated. Following this update, the utility stopped allowing the section 87A rebate for STCG under section 111A and other special rate incomes. Before the update, the ITR Utility and Calculator permitted the section 87A rebate against STCG under section 111A and other special rate incomes, except for LTCG under section 112A, where the rebate is explicitly barred by the section itself.
The portal states that if the total income of an assessee chargeable to tax under sub-section (1A) of section 115BAC does not exceed ₹7,00,000, the assessee is entitled to a rebate equal to 100% of the income tax or ₹25,000, whichever is less. This implies that under the New Tax Regime, the rebate is only available on incomes chargeable to tax under section 115BAC. Special incomes taxable under other sections, such as STCG under section 111A or section 115BBH, do not qualify for the rebate.
Additionally, an issue has been observed where, in some cases, the ITR Utility grants the rebate in the New Tax Regime even if the total income exceeds ₹7,00,000.
Concerns/Hardships of Taxpayers as Represented by ICAI
The ICAI has highlighted the need for modifications to the ITR Utility to enable the section 87A rebate on LTCG taxable under section 112 and STCG taxable under section 111A.
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