The Income Tax Department has introduced a major relief for taxpayers eligible for the Section 87A rebate for the financial year 2023-24, who were previously unable to claim it. Announced on December 31, 2024, through the Income Tax Return (ITR) e-filing portal, the department confirmed that these taxpayers would soon be able to file revised or belated ITRs via the ITR filing utility or directly on the e-filing portal.
This significant development comes in the wake of an interim directive by the Bombay High Court, which extended the deadline for filing revised or belated ITRs for resident individuals to January 15, 2025. This relief has been provided to ensure taxpayers do not miss out on claiming the Section 87A rebate, which had previously been restricted due to updates in the e-filing utility.
The Income Tax Department is in the process of implementing backend updates to the ITR forms to facilitate this change. Section 87A of the Income Tax Act, 1961, allows eligible taxpayers to claim rebates of up to Rs 12,500 under the old tax regime and Rs 25,000 under the new tax regime. The announcement on December 31 confirmed that taxpayers could soon file revised or belated ITRs through the ITR-2 and ITR-3 forms, which allow individuals to declare incomes such as Short-Term Capital Gains (STCG)—previously excluded from eligibility for the Section 87A rebate.
The update addresses a critical issue where taxpayers who filed their ITR after July 5, 2024, were unable to claim the rebate due to changes made to the e-filing utility. Many of these taxpayers received notices from the Income Tax Department, sparking widespread concern among professionals and individuals alike. This issue had caused significant frustration for those who had been denied the rebate they were entitled to under the law.
BOMBAY HIGH COURT'S INTERVENTION
The Bombay High Court intervened in this matter on December 20, 2024, issuing an interim order that emphasized the need for taxpayers eligible for the Section 87A rebate to not face procedural obstacles. The court directed the Central Board of Direct Taxes (CBDT) to extend the deadline for filing revised or belated ITRs, ensuring that taxpayers' statutory rights were protected. The court’s intervention has been seen as a vital move to ensure that taxpayers' rights are upheld, and no one is unfairly excluded from claiming legitimate rebates.
While the final judgment on this matter is awaited on January 9, 2025, tax professionals and individuals have praised the court’s intervention, which ensures that procedural changes in the e-filing system do not unduly disadvantage eligible taxpayers. This decision not only protects taxpayers' rights but also underscores the importance of timely updates to the tax filing systems, ensuring they align with legislative intent and provide a seamless experience for users.
As the revised utilities are rolled out on the e-filing portal, taxpayers are urged to file their returns accurately within the extended deadline. This will help them avoid any further complications, ensuring that they can benefit from the Section 87A rebate without delays or issues. Taxpayers should take advantage of this window to ensure they comply with all necessary procedures and avoid any potential penalties.
