If you’re an income taxpayer in India who missed out on claiming the Section 87A rebate during the initial Income Tax Return (ITR) filing period, there’s good news. The deadline for filing revised or belated returns has been extended to January 15, 2025, offering eligible taxpayers a final chance to claim their rightful rebates. This article delves into the details of the rebate, the reasons for its initial denial, and what taxpayers need to do now.
What Is Section 87A Tax Rebate?
Under Section 87A of the Income Tax Act, taxpayers earning up to ₹5 lakh (old regime) or ₹7 lakh (new regime) are eligible for a tax rebate. Here’s how it works:
| Tax Regime | Eligibility Income Limit | Maximum Rebate Amount |
|---|---|---|
| Old Regime (with exemptions) | ₹5 lakh | ₹12,500 |
| New Regime (minimal exemptions) | ₹7 lakh | ₹25,000 |
This rebate effectively reduces the tax liability to zero for eligible individuals. However, technical glitches in the ITR filing utility during the initial filing period led to unfair denials for many taxpayers.
Why Was the Rebate Denied?
In July 2024, the ITR utility was updated. This update inadvertently excluded special rate incomes, such as short-term capital gains (STCG) on equity taxed at 15%, from being considered for the rebate calculation.
For example:
- Taxpayer A earns ₹5 lakh as salary and ₹2 lakh as STCG.
- Pre-July 5, 2024: Both incomes were eligible for rebate under Section 87A.
- Post-July 5, 2024: The rebate was restricted to the salary portion, denying benefits on STCG.
The oversight caused widespread inconvenience, particularly for small taxpayers.
Steps Taken to Resolve the Issue
Following appeals from taxpayers, Chartered Accountants (CAs), and the Institute of Chartered Accountants of India (ICAI), the Bombay High Court intervened. On December 20, 2024, the court directed the Income Tax Department to address the issue by:
- Updating the ITR utilities for forms ITR-2 and ITR-3.
- Extending the filing deadline to January 15, 2025, allowing affected taxpayers to revise their returns.
The Income Tax Department announced the updated utilities on January 1, 2025, enabling manual entry of rebate values to rectify previous errors.
How to Claim the Rebate
If you were denied the rebate earlier, follow these steps to ensure you claim it now:
- Log in to the Income Tax e-filing Portal
Visit www.incometax.gov.in and log in with your credentials. - Download Updated ITR Utilities
Choose the relevant utility (ITR-2 or ITR-3), updated on January 1, 2025. - Manually Enter Rebate Values
Use the revised utility to manually input the correct rebate value under Section 87A. - Submit the Revised Return
File the revised ITR by the extended deadline of January 15, 2025. - Track Refund Status
After submission, monitor the refund status on the portal to ensure timely receipt of excess tax paid.
Penalties for Late Filing
Taxpayers who missed the original July 31 deadline can file belated returns. However, the following penalties and charges apply:
| Income Level | Penalty Amount |
|---|---|
| Total income > ₹5 lakh | ₹5,000 |
| Total income ≤ ₹5 lakh | ₹1,000 |
Additionally, taxpayers with unpaid dues will incur 1% interest per month under Section 234A.
FAQs on Section 87A Rebate
1. What is the deadline to claim the rebate under Section 87A?
The extended deadline for filing revised or belated ITR to claim the rebate is January 15, 2025.
2. Who is eligible for the rebate?
Taxpayers earning up to ₹5 lakh (old regime) or ₹7 lakh (new regime) can claim a rebate of ₹12,500 or ₹25,000, respectively.
3. What if I miss the January 15 deadline?
You will lose the opportunity to claim the rebate, and no further extensions are likely.
4. Can I claim the rebate on short-term capital gains?
Yes, taxpayers can now include STCG and other special rate incomes in the rebate calculation using the updated ITR forms.
5. How do I check if my rebate has been processed?
After filing, visit the Income Tax e-filing portal to track your refund status under the “Services” tab.
Final Thoughts
The extension to January 15, 2025, is a golden opportunity for taxpayers affected by technical glitches to claim their rightful rebates. Don’t wait until the last minute—log in to the Income Tax portal, update your ITR form, and file your revised return today. By acting promptly, you can secure the benefits you deserve and avoid unnecessary penalties.
Stay informed, take action, and make the most of the extended deadline!