The government started giving special rebate under section 87A to give tax relief to people with low income. This rebate is available in both the new regime of income tax and the old regime.
However, there is a difference in the amount of rebate. In the new regime, if a taxpayer’s annual income is up to Rs 7 lakh, then the rebate available under section 87A reduces his tax liability to zero. In the old regime, if a person’s annual income is up to Rs 5 lakh, then the rebate available under section 87A reduces his tax liability to zero. But, in some situations, taxpayers are not getting this rebate. Chartered accountant Abhas Halkhandi has told about this in a post on the social media platform X.
Halkhandi and some other chartered accountants have said that in the new regime, if a taxpayer has any special rate income like short term capital gains, then he is not getting the benefit of rebate under section 87A. It is worth noting that according to the amendment made through Budget 2025, the rebate available under section 87A does not apply in the case of special rate income. But, this change is applicable from the financial year 2025-2026. This means that even if there was special rate income in the previous financial year, rebate should be available under section 87A.
In the financial year 2024-25, if a person’s taxable income is up to Rs 7 lakh, then he can get a rebate of up to Rs 25,000 under section 87A in the new income tax regime. The revised rule is applicable from the financial year 2055-26. According to this, if a person’s income is up to Rs 12 lakh annually, then he can get a rebate of up to Rs 60,000 under this section. But, if the taxpayer has any special rate income, then this rebate will not be available.
But, chartered accountants say that taxpayers are not getting the benefit of rebate under section 87A even during the financial year 2023-24 and 2024-25. It has been observed that after July 5, 2024, income tax return filing utilities are not allowing rebate under section 87A on special rate income. This problem is still continuing. This is causing problems to those taxpayers whose total annual income was up to Rs 7 lakh in the last financial year, but the income includes special rate income.
