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Aug 11, 2025
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No income tax rebate under Section 87A even if income is less than Rs 7 Lakh under new tax regime in this situation, point out CAs
Chartered Accountant Abhas Halakhandi, writing on X (formerly known as Twitter) has recently brought attention to a concern regarding the denial of the Section 87A tax rebate to eligible taxpayers. Section 87A rebate is applicable to taxpayers with an annual income of up to Rs 7 lakh under new tax regime and Rs 5 lakh under the old tax regime. When the Section 87A tax rebate is applied, the net tax liability becomes nil. However, Halakhandi and other chartered accountants have highlighted on social media that it is not being given to eligible taxpayers if they have any special rate incomes like short term capital gains (STCG) under the new tax regime.
In this context, it is important to mention that the Section 87A tax rebate is not applicable to special rate income as per the amendment introcuded in Budget 2025, which will take effect from FY 2025-26 (AY 2026-27) onwards. The concern raised by chartered accountants is that the Section 87A rebate on special rate incomes is also not being granted for FY 2024-25 (AY 2025-26).
Halakhandi said on X (formerly Twitter on August 4, 2025): “Section 87A Rebate – Restriction applied even before it became law? From FY 2025-26, 87A rebate in the new regime won’t apply on special rate income (like LTCG, STCG @111A)—as per new proviso inserted by Finance Act 2025. But taxpayers are paying additional taxes & being denied this rebate in FY 2023-24 and 2024-25 — even though the restriction wasn’t in force! Only in Indian taxation- future law enforced for past years!!”
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