ITR revised to claim Income Tax Rebate in line with Bombay HC Order processed with Demand:

ITR revised to claim Income Tax Rebate in line with Bombay HC Order processed with Demand There is an important new update on income tax rebate matter. Many taxpayers have revised their ITR in line with the Bombay HC judgment to get the benefit of a tax rebate under Section 87A.

Bombay High Court Judgement

In January 2025, the High Court of Bombay (Bombay HC) has ruled out his final verdict in the matter of the income tax rebate issue. The section 87A tax rebate issue is of particular interest and dispute among taxpayers. The issue grew so heated that several court cases were filed challenging the tax department’s decision to refuse individuals eligible for the 87A tax rebate. The tax department appears to have taken the position that if the ITR includes special rate profits such as short-term capital gains income, the ITR cannot claim the 87A tax rebate on special income. This stance, however, was not properly communicated to taxpayers, and changes were introduced to the ITR processing software unexpectedly on July 5, 2024, resulting in the 87A tax rebate mess. Later, CBDT also extended the revised and belated ITR filing deadline to 15th January 2025 from the earlier deadline of 31st December 2024, with updated ITR utility so that taxpayers can claim this rebate. This matter of rebate went and was addressed before the Bombay High Court for a decision and the High Court of Bombay declared his final decision. The HC ordered the Income Tax Department to update the ITR utility software and accept all Section 87A tax rebate claims. Eligible taxpayers with a taxable income of up to Rs.5 lakh under the old tax regime or up to Rs.7 lakh under the new tax regime can claim a tax rebate under Section 87A to reduce their tax liability to zero. That was the final verdict of the Bombay High Court. However, irrespective of the court decision on rebate, the court has not decided in favor of giving rebate benefit on special rate income. The court only extended the ITR filing deadline so that if the taxpayer wants, he can claim a rebate benefit on special rate incomes. Giving or not giving the rebate is still in the hands of the income tax department.

ITR Processed with Demand

Those taxpayers who revised their ITR to claim rebate, now their ITR is being processed with demand. This means that the tax department's stance is quite clear on this.

What to do now?

In case the Taxpayer, wants to claim the rebate benefit, they will have to go for further litigation. Otherwise, one is required to pay the demand, within 30 days of the Demand Intimation.