Extended Jan15 ITR deadline: Revise your income tax returns today to claim tax rebate under Section 87A

Denied tax rebate in July 2024 despite being eligible? Revise your ITR today to claim a refund

Income tax-payers who were denied the tax rebate under Section 87A in July 2024 despite being eligible, ought to complete the process today.

In most cases, small tax-payers with ‘special rate’ income such as short-term capital gains from sale of equities suffered when the income tax return (ITR) utility for the financial year 2023-24 (assessment year 2024-25) was updated on July 5, 2024.

File returns by January 15 to claim 87A rebate

“We are advising our clients make manual edits and enter the correct values to claim the rebate as the updated ITR utility continues to pose challenges. Since the I-T department has made the effort to allow such tax-payers to claim the rebate, we are hopeful that they will get their tax refund on the excess amount paid due to the glitch in July 2024,” says chartered accountant Mayank Mohanka, Founder-Director, TaxAaram.com, a tax consultancy firm.

At present, the ITR utility on the income tax e-filing portal does not auto-calculate the rebate as it should have. “However, since the manual entry of values is being permitted in the column of rebate and the intention seems to be to allow the rebate, tax-payers who did not get the benefit of the rebate in July should revise their returns by January 15,” says Abhishek Soni, Co-founder, Tax2Win, a tax consultancy portal.

On January 1, the Income Tax department announced that it would update the tax return-filing `utilities' for ITR 2 and 3 to allow eligible taxpayers to claim the benefit that they were denied earlier. This stemmed from the Bombay HC’s interim order on December 20 directing the I-T department to extend the deadline for filing belated / revised returns by 15 days. This was meant to enable affected taxpayers to claim the rebate. Subsequently, the deadline was pushed to January 15, and on January 1, the I-T department announced that it would update the utilities for ITR 2 and 3.

Also read: Wait until I-T portal glitch is resolved before revising returns, CAs tell tax-payers

Tax rebate unfairly denied in July

Under the old, with-exemptions regime, taxpayers earning up to Rs 5 lakh are entitled to a rebate of up to Rs 12,500. Those who choose the new, minimal exemptions regime are eligible for a rebate of up to Rs 25,000.

However, many taxpayers who had ‘special rate’ incomes, such as short-term capital gains on equities (taxed @15 percent in financial year 2023-24), were denied the rebate on this portion of their income while filing their returns last July. The ‘glitch’ started after the ITR utility was updated on July 5, 2024.

For example, say, taxpayer A had a salary income of Rs 5 lakh and STCG of Rs 2 lakh on sale of shares in FY 2023-24, and filed her return on July 30. She's qualified for a tax rebate under section 87A under the new tax regime. Had she filed her return before July 5, 2024, when the software utility was updated, she would have been allowed the rebate. However, post July 5, the updated ITR utility declined the rebate on STCG, restricting the benefit to the salary portion of the total income.

Despite requests to from chartered accountants, income taxpayers, and the Institute of Chartered Accountants of India (ICAI) to reconsider its stance, the tax department had not done so. However, things changed after the Bombay High Court order on December 20.

Also read: Didn’t submit your tax returns by July 31? Don’t miss the deadline for late filing

Last date to file belated I-T returns 

Tax-payers who were not affected by the technical glitch but missed completing the ITR process by the July 31 due date can also file belated returns. However, such individuals will have to shell out late filing fees and interest on the tax payable, if any. Late filers are liable to pay a penalty of Rs 5,000 for the delay. However, if their total income is less than Rs 5 lakh, this amount is limited to Rs 1,000. Moreover, in case you have any taxes due, you have to cough up simple interest under Section 234A at the rate of 1 percent per month of delay, or part thereof. This will come into effect immediately after July 31 up to the actual date of filing returns.