CA Exposes 87A Rebate Blunder: Denied Before Law Takes Effect

A new change is being introduced in Section 87A Rebate under the new tax regime from the financial year 2025-26. However, some taxpayers are already being refused the benefit, even though the law is not applicable yet.

Section 87A provides tax relief to individuals whose total income is within a certain limit. Under the old regime, if your total income is up to Rs 5 lakh, you will get a full rebate of up to Rs 12,500.

Under the new tax regime (FY 2024-25), if your total income is up to Rs 7 lakh, you get a rebate of up to Rs 25,000. For FY 2025-26, the rebate is up to Rs 60,000 for taxable income up to Rs 12 Lakh.

From April 1, 2026 (FY 2025-26), a new proviso (condition) is added in the 87A rebate. The rebate will not be applicable to income taxed at special rates, such as Short-term Capital Gains (STCG) under section 111A or Long-term capital Gains (LTCG).

This proviso is applicable from April 1, 2026, but some taxpayers are asked to pay extra taxes and are also being rejected from claiming Section 87A rebate in Financial Year 2023-24 and 2024-25. Many professionals and taxpayers are criticising this as the future laws have been enforced for the past years.

🚨 Section 87A Rebate – Restriction applied even before it became law?

From FY 2025-26, 87A rebate in new regime won’t apply on special rate income (like LTCG, STCG @111A)—as per new proviso inserted by Finance Act 2025 (Pic👇)

But taxpayers are paying additional taxes & being… pic.twitter.com/VF9SxT9Gh8

— Abhas Halakhandi (@AbhasHalakhandi) August 4, 2025