Section 87A Rebate on STCG: ITAT Jaipur Ruling Benefits Taxpayers (AY 2024‑25)
The ITAT Jaipur Bench has clarified that the Section 87A rebate is available on short‑term capital gains taxed under Section 111A for taxpayers who opted for the new tax regime. This article explains the ruling, who it helps, and how to contest a demand for AY 2024‑25.
CA Harun Raaj
Chartered Accountant · Harun Raaj & Associates
Legal basis: Income‑tax Act, 1961, Section 87A — Effective: Ongoing. Source: https://www.taxscan.in/top-stories/tax-rebate-us-87a-allowable-on-short-term-capital-gain-us-111a-itat-upholds-jcitas-order-read-order-1450572
Section 87A Rebate on Short‑Term Capital Gains: ITAT Jaipur Rules in Taxpayers’ Favour (AY 2024‑25)
If you sold listed equity shares or equity‑mutual‑fund units in FY 2023‑24, opted for the new tax regime, and received a tax demand despite total income below ₹7 lakh, the Income‑Tax Appellate Tribunal (ITAT) – Jaipur Bench has ruled that the Section 87A rebate must be allowed on the tax computed under Section 111A.
On 31 August 2026, the tribunal (ITA No. 319/JPR/2026, Dolly Khandelwal) upheld the JCIT(A) order, stating:
“Rebate is allowable on the tax computed on a short‑term capital gain offered to tax under Section 111A where the assessee has opted for the tax regime under Section 115BAC.”
The tribunal observed that neither Section 87A nor Section 111A expressly excludes STCG from the rebate when the new regime (Section 115BAC) is in force. The non‑obstante clause in Section 115BAC only alters rate computation; it does not affect rebate entitlement under Chapter VIII.
Who Is Directly Affected
If all the above conditions match, the full ₹25,000 rebate (or the lower of tax payable) can be claimed against the total tax, not just the tax on salary.
Illustrative Computation (For Educational Purposes Only)
Ramesh, a salaried employee from Pune, opted for the new tax regime for FY 2023‑24. Salary after the standard deduction: ₹3,50,000. STCG from equity‑mutual‑fund units: ₹1,50,000 (taxed at 15 % under Section 111A). Total income: ₹5,00,000.
If the CPC applied the rebate only to the salary tax, the demand would show ₹22,500 tax + 4 % cess = ₹23,400, plus interest. The ITAT ruling confirms that the entire ₹25,000 rebate is available, wiping out the demand.
Comparison: Before vs. After the ITAT Jaipur Ruling
What to Do If You Have an AY 2024‑25 Demand
- Check the demand – Log in to the e‑File portal → ITR Status → Outstanding Demand.
- Identify the cause – If the demand stems solely from denial of the Section 87A rebate on STCG, you have two procedural routes:
- Act promptly – Delaying may convert the demand into a “final demand” and attract interest under Section 220(2).
- Consider paying under protest – If the deadline for appeal is near, you may settle the amount to stop interest, while simultaneously filing the rectification or appeal.
Outlook for AY 2026‑27
The Finance Act 2025 amended Section 87A for AY 2026‑27: the rebate of ₹60,000 (for total income ≤ ₹12 lakh) is not available on tax payable on income chargeable at special rates, such as STCG under Section 111A or LTCG under Section 112A. Consequently, the benefit enjoyed in AY 2024‑25 does not automatically carry forward.
Key point: The ITAT Jaipur Bench confirmed that the Section 87A rebate is fully allowable on tax computed under Section 111A for new‑regime taxpayers in AY 2024‑25.
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This article is for educational purposes only and does not constitute legal or tax advice. For advice on your specific situation, please contact us.
I'm CA Harun Raaj, Visakhapatnam. If you received a demand for AY 2024‑25, reach out so we can protect your rights.
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See Also
Frequently Asked Questions
Can I still contest a Section 87A rebate denial for AY 2024‑25?
Yes. You may file a Section 154 rectification application within 4 years from the end of the FY in which the intimation was issued, or appeal under Section 246A to the CIT(A) within the short window that starts on the date of the intimation. Both routes are supported by the ITAT Jaipur and Ahmedabad rulings.
What is the maximum Section 87A rebate for AY 2024‑25?
For taxpayers who opted for the new tax regime, the rebate is capped at ₹25,000 when total income does not exceed ₹7 lakh, as per Section 87A of the Income‑tax Act.
Does the ITAT ruling apply to the old tax regime?
No. The decision specifically addresses taxpayers who have opted for the new tax regime under Section 115BAC. Taxpayers under the old regime remain subject to the earlier interpretation.
How does the Finance Act 2025 affect the Section 87A rebate for AY 2026‑27?
The amendment removes the rebate on tax payable on income chargeable at special rates, such as STCG under Section 111A and LTCG under Section 112A. The rebate for AY 2026‑27 is ₹60,000 but applies only to tax on income taxed at normal slab rates.
Can my CA file a Section 154 rectification online?
Yes. Section 154 applications are filed through the e‑filing portal under *e‑File → Rectification*. A CA can submit the application on your behalf using authorised representative access.
What is the time limit for filing a Section 246A appeal?
The appeal must be lodged within the period specified in the Section 143(1) intimation, typically 30 days from the date of service, unless an extension is granted.
If the demand includes interest under Section 220(2), can I still claim the rebate?
The rebate reduces the principal tax liability. Interest on any remaining unpaid amount continues to accrue under Section 220(2). Contesting the demand early can prevent further interest accrual.
Does the ITAT ruling affect long‑term capital gains (LTCG) under Section 112A?
The Jaipur Bench ruling pertains only to short‑term capital gains taxed under Section 111A. LTCG under Section 112A remains excluded from the Section 87A rebate for AY 2024‑25.
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