New Delhi: In a major relief for small taxpayers, the Income Tax Appellate Tribunal (ITAT) Chennai has ruled that Section 87A rebate can also be claimed on long-term capital gains (LTCG).
Why is this important?
The government had announced in Budget 2025 that Section 87A rebate would not apply to incomes taxed at special rates (like LTCG and short-term capital gains). But this applies only from April 1, 2025 (FY 2025-26). For earlier years, like AY 2024-25, taxpayers can still claim the rebate.
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Case Background
Venkatraman, a Tamil Nadu resident, filed his ITR for AY 2024-25 under the new tax regime.
His total income was Rs 4.97 lakh (including LTCG).
He claimed the Section 87A rebate of Rs 12,500.
The tax department’s CPC system denied the rebate, saying LTCG is taxed at special rates.
The first appeal also rejected his claim.
Finally, ITAT Chennai ruled in his favour, saying the law does not exclude such income for that year.
Key Observations
Section 87A gives a tax rebate to individuals with income up to Rs 7 lakh (new regime) or Rs 5 lakh (old regime).
For AY 2024-25, the law does not block the rebate for LTCG.
The amendment restricting it only starts from AY 2025-26.
Therefore, Venkatraman was allowed the rebate.
