Income Tax Department to correct ITR forms to allow eligible taxpayers to claim section 87A tax rebate for FY 2023-24

The Income Tax Department announced good news for taxpayers who were entitled for the section 87A tax rebate for the financial year 2023-24 but were unable to claim it. The tax department notified this relief on the income tax return (ITR) e-filing portal late at night on December 31, 2024.

According to the announcement, eligible taxpayers will soon be able to file a revised or belated income tax return to get a section 87A tax rebate, either through the ITR filing facility or online on the e-filing site.

This relief follows the Bombay High Court’s interim order directing the tax department to extend the revised and belated ITR filing deadline for qualified taxpayers to collect the 87A tax rebate.

The appropriate back-end software updates in the online ITR form will be completed shortly to reflect this (87A rebate claim). Section 87A of the Income Tax Act of 1961 allows qualifying taxpayers to seek a tax rebate of up to Rs.12,500 under the old tax regime and Rs.25,000 under the new tax regime.

“The updated utilities for ITR forms 2 and 3, giving effect to Circular No. 21 dated December 31, 2024, and including the option to update the 87A rebate will be made available shortly,” announced the Income Tax Department on the e-filing ITR portal on December 31, 2024.

Option to claim 87A tax rebate by filing revised/belated ITR-2 or ITR-3 form will be enabled soon

The back end changes will only affect the ITR-2 and ITR-3 forms, as the ITR e-filing utility has not allowed an individual to claim an 87A tax rebate against any special rate income like as Short Term Capital Gains (STCG) since July 5, 2024.

Chartered Accountants stated at the time that many taxpayers who submitted ITRs using the e-filing portal after July 5, 2024 and claimed a tax rebate on special rate incomes received tax notices later. Only ITR-2 and ITR-3 allow an individual to report capital gains income for tax purposes.

Revised and belated ITR deadline extended

Only residents have benefited from the extended deadline to file updated or belated ITRs.

In a circular dated December 31, 2024, the Income Tax Department stated, “The Central Board of Direct Taxes in exercise of its powers under section 119 of the Income Tax Act, 1961 extends the last date for furnishing belated return of income under sub-section (4) of section 139 of the Act or for furnishing revised return of income under sub-section (5) of section 139 of the Act for the AY 2024-25 in the case of resident individuals from 31 st December, 2024 to 15th January, 2025.”