Quick Summary
The long-standing confusion surrounding Section 87A rebate claims has reared its head again. Despite revising their income tax returns (ITRs) in January 2025 as per the Bombay High Court's directive, numerous taxpayers-primarily those with total incomes below Rs 7 lakh-are now being served demand notices by the Income Tax Department. Tax experts reveal that these notices, issued under Section 143(1) of the Income Tax Act, disallow the Section 87A rebate for income taxed at special rates-such as
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FAQ :
Taxpayers are receiving demand notices because the Income Tax Department is disallowing the Section 87A rebate for income taxed at special rates, like Short-Term Capital Gains, even when returns were revised following the Bombay High Court's directive.
The Bombay High Court directed the Income Tax Department to provide a revision window for taxpayers to claim the Section 87A rebate, which was subsequently opened from January 1 to January 15, 2025.
Taxpayers should check if 30 days have passed since receiving the intimation and file Form 35 electronically via the e-filing portal to appeal against the demand, attaching supporting documents like the Bombay HC judgment.
Yes, some appeals, particularly from Gujarat and Mumbai, have already resulted in favourable outcomes for taxpayers, though each case is judged individually.
No, the Budget 2025 clarification states that from FY 2025-26 onwards, special rate incomes will not qualify for the rebate. This restriction did not apply to FY 2023-24, which is a point of contention for current appeals.
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