[BREAKING] ITAT allows Income Tax Rebate u/s 87A on STCG under New Regime [Read Order]
The revised computation resulted in a tax liability of ₹13,320 entirely on account of STCG under Section 111A, against which the assessee claimed a full rebate under Section 87A.
![[BREAKING] ITAT allows Income Tax Rebate u/s 87A on STCG under New Regime [Read Order]](https://images.taxscan.in/h-upload/2025/08/14/2076634-s-87a-rebate-changes-taxscan.webp "[BREAKING] ITAT allows Income Tax Rebate u/s 87A on STCG under New Regime [Read Order]")
In a major relief to minor investors, the Income Tax Appellate Tribunal (ITAT), Ahmedabad Bench, has allowed the appeal of the assessee and held that the rebate under Section 87A of the Income Tax Act, 1961, is available even when the assessee’s total income comprises short-term capital gains (STCG) taxable under Section 111A, provided the total income does not exceed ₹7,00,000 and...
In a major relief to minor investors, the Income Tax Appellate Tribunal (ITAT), Ahmedabad Bench, has allowed the appeal of the assessee and held that the rebate under Section 87A of the Income Tax Act, 1961, is available even when the assessee’s total income comprises short-term capital gains (STCG) taxable under Section 111A, provided the total income does not exceed ₹7,00,000 and the assessee has opted for the new tax regime under Section 115BAC(1A).
The appeal arose from an order dated 15 April 2025 passed by the Commissioner of Income Tax (Appeals), upholding the denial of rebate by the Centralised Processing Centre (CPC), Bengaluru, while processing the assessee’s return under Section 143(1) for the assessment year (AY) 2024-25.
The assessee had filed her original return on 30 July 2024, declaring a total income of ₹4,27,635, which included STCG of ₹3,79,559, long-term capital gains (LTCG) of ₹38,840, and income from other sources of ₹9,236. A revised return was filed on 31 December 2024, correcting capital gains schedules and opting for the default new regime under Section 115BAC(1A). The revised computation resulted in a tax liability of ₹13,320 entirely on account of STCG under Section 111A, against which the assessee claimed a full rebate under Section 87A.
The CPC, in its intimation dated 28 February 2025, disallowed the rebate without citing any specific reason or issuing a notice under Section 143(1)(a), and raised a total demand of ₹15,820, inclusive of interest and cess.
Before the CIT(A), the assessee argued that Section 87A, as amended by the Finance Act, 2023, imposes no restriction on rebate against STCG under Section 111A, unlike the explicit exclusion in Section 112A(6) for certain LTCG. The CIT(A), however, held that the “subject to” clause in Section 115BAC(1A) and provisions of Chapter XII prevented rebate against special rate incomes, relying on the Finance Bill 2025 memorandum clarifying that such rebate would not apply to these incomes.
The Tribunal observed that neither Section 87A nor Section 111A contained any express restriction for AY 2024-25, and the prospective amendment in the Finance Act, 2025 effective AY 2026-27 confirmed the absence of such a bar for the year under appeal. It held that Section 87A operates independently under Chapter VIII and applies to total tax computed, regardless of whether it arises from slab or special rates, provided the income threshold is met.
Finding that the denial is system-driven and unsupported by statutory provisions, the Tribunal directed the Assessing Officer to allow the rebate of ₹13,320 and delete the demand.
With this, the Tribunal allowed the appeal in full, granting relief to the assessee and setting a precedent for similar claims in AY 2024-25.
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