Faulty ITR utility in respect of Sec 87A needs immediate alteration:
1. Before the amendment by the Finance Act 2023, section 87A read as under,
“Rebate of income-tax in case of certain individuals.
87A. An assessee, being an individual resident in India, whose total income does not exceed five hundred thousand rupees, shall be entitled to a deduction, from the amount of income-tax (as computed before allowing the deductions under this Chapter) on his total income with which he is chargeable for any assessment year, of an amount equal to hundred per cent of such income-tax or an amount of twelve thousand and five hundred rupees, whichever is less.
2. The Finance Act, 2023 has inserted a Proviso in section 87A of the Income Tax Act, w.e.f. 1.4.2024, namely:
“Provided that where the total income of the assessee is chargeable to tax under sub-section (1A) of section 115BAC, and the total income—
does not exceed seven hundred thousand rupees, the assessee shall be entitled to a deduction from the amount of income-tax (as computed before allowing for the deductions under this Chapter) on his total income with which he is chargeable for any assessment year, of an amount equal to one hundred per cent of such income-tax or an amount of twenty-five thousand rupees, whichever is less;
exceeds seven hundred thousand rupees and the income-tax payable on such total income exceeds the amount by which the total income is in excess of seven hundred thousand rupees, the assessee shall be entitled to a deduction from the amount of income-tax (as computed before allowing the deductions under this Chapter) on his total income, of an amount equal to the amount by which the income-tax payable on such total income is in excess of the amount by which the total income exceeds seven hundred thousand rupees
3. Therefore, a bare perusal of the above reproduced pre-amended as well as the amended section 87A of the Income Tax Act, by the Finance Act, 2023, makes it duly evident that a taxpayer having a total income of upto Rs 5 lakhs in the old regime and upto Rs 7 lakhs in the new regime, will get the rebate of Rs 12,500 and Rs 25,000 respectively and as such will not be required to pay any income tax.
4. Sub-section (6) of section 112A of the Income Tax Act mandates that the benefit of rebate u/s 87A of the Income Tax Act, shall not be available in case of the long-term capital gains income on equity shares or equity oriented mutual funds taxable at 10%.
5. No other income, taxable at a special rate (some of which are listed above) other than the STT paid long term capital gains income on equity shares/ equity oriented mutual funds taxable at a special rate of 10% without indexation u/s 112A of the Income Tax Act, contains any restriction or condition that the benefit of rebate u/s 87A will not be available in respect of such income.
6. However, new income tax return filing utility of the ITR forms, uploaded in the income-tax e-filing portal, w.e.f. 5.7.2024, is not allowing the benefit of rebate u/s 87A to all kinds of special incomes taxable at a special rate including the short term capital gains income on equity shares/ equity oriented mutual funds taxable at a special rate of 15% u/s 111A of the Income Tax Act.
