1 week ago
Jaipur ITAT Upholds 87A Rebate on STCG for AY 2024-25
Madhu Agarwal asked for a tax rebate called Section 87A.
Some of her income came from short-term investments that are taxed under a special rule.
The tax-processing centre refused to apply the rebate to that part of her tax bill.
The Jaipur ITAT said that, for the 2024-25 assessment year, the law did not clearly forbid using the rebate this way.
The Tribunal also noted that the law specifically restricted the rebate for some long-term gains but did not do the same for these short-term gains.
The government later introduced clearer restrictions for future years.
Those later rules could not be used to change the rules for AY 2024-25.
Other taxpayers may rely on the decision, but they must separately examine remedies such as rectification or appeal.
The Jaipur ITAT ruled that Section 87A could apply to tax on short-term capital gains under Section 111A for AY 2024-25.
The case involved Madhu Agarwal, whose total income was ₹4,99,250, including ₹3,61,100 in short-term capital gains.
The Centralised Processing Centre had denied ₹23,276 of the claimed rebate while processing her return under Section 143(1).
The Tribunal found no express exclusion for Section 111A gains, unlike the restriction specified for certain long-term capital gains under Section 112A.
The ruling applies directly to the taxpayer and may support similar claims, but it does not automatically create refunds for all affected taxpayers.
- Who
- The Jaipur Bench of the Income Tax Appellate Tribunal, taxpayer Madhu Agarwal, and Revenue authorities.
- What
- The Tribunal upheld Madhu Agarwal's claim for a Section 87A rebate against tax payable on Section 111A short-term capital gains.
- Where
- The ruling was issued by the Jaipur Bench of the Income Tax Appellate Tribunal.
- When
- The order was pronounced on 20 August 2026 and concerned Assessment Year 2024-25.
- Why
- For AY 2024-25, Section 87A did not expressly exclude short-term capital gains taxed under Section 111A.
Taxpayer and Tribunal view
Revenue and CPC view
Scope of Section 87A
Taxpayer and Tribunal view
For AY 2024-25, the rebate referred to tax payable on total income and did not expressly exclude short-term capital gains taxed under Section 111A.
Revenue and CPC view
The rebate was intended to offset tax calculated at normal slab rates, not tax imposed on income taxed separately at special rates.
Meaning of the later amendment
Taxpayer and Tribunal view
The prospective restriction introduced for later assessment years indicated that no equivalent restriction applied to AY 2024-25.
Revenue and CPC view
The amendment and CBDT Circular No. 13/2025 reflected the original legislative intent that special-rate income should not receive the rebate.
Automated return processing
Taxpayer and Tribunal view
A debatable interpretation of a statutory rebate should not have been resolved through an automated adjustment under Section 143(1).
Revenue and CPC view
The Centralised Processing Centre denied the rebate against the special-rate tax during return processing.
Key facts
- Case
- Income Tax Officer v. Madhu Agarwal, ITA No. 390/JPR/2026
- Taxpayer's total income
- ₹4,99,250
- Short-term capital gains
- ₹3,61,100, taxable under Section 111A
- Rebate claimed
- ₹23,276 under Section 87A
- AY 2024-25 rebate limit
- Up to ₹25,000 for eligible resident individuals under the new tax regime with total taxable income not exceeding ₹7 lakh
- Later restriction
- The subsequent restriction was introduced prospectively from AY 2026-27 and does not govern AY 2024-25
- Possible remedies
- Affected taxpayers may examine rectification under Section 154, an appeal, or other remedies subject to limitation periods and individual facts
Quotes
CA (Dr.) Suresh Surana
Chartered Accountant commenting on the Jaipur ITAT ruling
“The subsequent amendment operates prospectively from Assessment Year 2026-27. Although the income threshold under the new regime has been increased to Rs. 12 lakh and the maximum rebate to Rs. 60,000, the rebate cannot exceed the tax calculated at the normal slab rates prescribed under section 115BAC(1A).”
financialexpress.com
“Its principal significance is that, under the law applicable to Assessment Year 2024-25, the absence of an express restriction in sections 87A and 111A could not be supplemented through return-processing software, a subsequent clarification or a prospective legislative amendment.”
financialexpress.com
Sources
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