If you're filing your taxes under India’s New Tax Regime (Section 115BAC) this year, you may have noticed something odd: even when your total income is under ₹7 lakh, the famed Section 87A tax rebate isn't getting applied automatically. What’s happening—and is the rebate still available? Let’s break it down from the latest updates and video analysis.
What is Section 87A Rebate? A Quick Refresher
Old Regime (FY 2024-25):
- Resident individuals with taxable income up to ₹5 lakh could claim a rebate up to ₹12,500, reducing their tax liability to zero.
- Resident individuals with income up to ₹7 lakh were eligible for a rebate up to ₹25,000.
- The rebate limit under the new regime has increased to ₹60,000 for incomes up to ₹12 lakh, effective starting FY 2025-26 (AY 2026-27).
Why the Rebate Isn’t Automatically Applied Right Now (AY 2025-26)
1. The Portal’s Behavior with “Special Rate” Incomes
Most ITR utilities (like the Income Tax e-filing portal) currently disallow automatic application of Section 87A rebate if your income includes special-rate sources like:
- Short-Term Capital Gains (STCG) under Section 111A
- Long-Term Capital Gains (LTCG) under Section 112A
This remains true even if your total taxable income remains under ₹7 lakh.
2. Court Ruling Offers Relief
A recent judgment from the ITAT Ahmedabad (August 12, 2025) ruled in favor of a taxpayer, confirming that the rebate should apply even on STCG—so long as total income does not exceed ₹7 lakh.
3. Historic Scope Still Permits Manual Claim
Though the portal doesn't auto-apply the rebate on special incomes, tax experts confirm that for AY 2025-26, you can still claim it manually—it’s legally allowed until the new law takes effect next year.
What Taxpayers Should Do Now
| Step | Action | Why It Matters |
|---|---|---|
| 1. Check Your Total Taxable Income | Ensure it's ≤ ₹7 lakh (FY 2024-25) or anticipate ₹12 lakh for FY 2025-26. | Be confident you're within the rebate threshold. |
| 2. Look for Special-Rate Incomes | Check if your return declares STCG or LTCG. | Filing with these may prevent auto rebate. |
| 3. Claim Rebate Manually (if needed) | Enter rebate details under Section 87A during ITR filing. | Avoid unnecessary tax liability. |
| 4. Track Upcoming Changes | In FY 2025-26, expect ₹60,000 rebate for incomes up to ₹12 lakh—but note: exemptions still exclude special-rate incomes like STCG. |
Summary at a Glance
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Yes, under the new regime (FY 2024-25), rebate is eligible up to ₹25,000 on incomes ≤ ₹7 lakh—but only for slab-rate incomes unless manually claimed.
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Portal issue: ITR utility blocks rebate on special-rate incomes like STCG/LTCG, despite total income being under the limit.
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Good news: ITAT ruling supports manual claim for AY 2025-26.
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Looking ahead: From FY 2025-26, rebate expands to ₹60,000 for incomes up to ₹12 lakh—but special-rate incomes remain exempt.
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