Income Tax Demand: Capital Gain Income ITR being processed without Section 87A Rebate

In a significant update, the income tax department is currently issuing various tax demands to taxpayers after processing their income tax returns.

A Delhi-based Chartered Accountant said, “A good number of people are getting demand notices simply because they have capital gain incomes only. The benefit of an unexhausted threshold limit is not being provided to them. Only rebate u/s 87A is being considered of 25000. Nothing else. A simple ITR with just capital gain income of 300000 income is getting a demand after processing of ITR.”

CA Himank Singhla said, “INCOME TAX RETURNS PROCESSING: CPC has started raising demand on capital gain income, by not giving the benefit of 87A Rebate! Moot question is “Why portal allowed filing ITR by allowing the rebate on the capital gain if your intention was not to allow it.”

Rebate under Section 87A

A rebate is a reduction in the amount of tax that you must pay. The rebate limit is the maximum amount of rebate that can be claimed. In India, the limit of rebate under Section 87A is Rs.12,500 for the old tax regime and Rs.25,000 for the new tax regime in the financial year 2024-25.

Section 87A rebate offers benefits from your tax liability. Rebate under section 87A can be claimed if your taxable income does not exceed the prespecified limit for the given financial year.

Individual taxpayers in India can receive a tax rebate of up to Rs.25,000 to lower their tax liabilities. This rebate is offered to resident individuals with taxable incomes of up to Rs.7,00,000 under the new tax regime. The old tax regime provided a tax rebate of up to Rs.12,500 for a maximum annual income of Rs.5,000.00.