Finally good news is there for those taxpayers who are eligible to claim section 87A tax rebate but were prevented from claiming it post July 5, 2024. The Income Tax Department has now updated the excel utilities for ITR Forms 2 and 3 to exercise the option to update tax rebate under section 87A for FY 2023-24 (AY 2024-25). The department also said the HTML utilities will be made available shortly. This information was mentioned by the Income Tax Department in the late hours of yesterday. The only catch is you have to manually edit the tax rebate column in the ITR excel utility and then validate it in order to claim section 87A tax rebate. If you leave the tax rebate column to be auto filled then you won’t get 87A tax rebate, say experts who tried all possible permutations and combinations. However, this manual editing option although seems to work for the time being needs more clarity, says experts.
If you recall the whole section 87A tax rebate mess started when the tax department changed the ITR software on July 5, 2024. As a result of this many eligible taxpayers were either prevented from claiming section 87A tax rebate or were sent a tax demand notice for claiming it. In this regard the Honorable Bombay High Court gave an interim relief by ordering the tax department to extend the revised and belated ITR filing deadline to January 15, 2025 to enable taxpayers to claim 87A tax rebate.
Multiple experts with whom we spoke back then said the root of the problem is the JSON schema which is also called the brain of the utility software as it contains the logic codes. What’s noteworthy is the fact that as of January 7, 2025 the Schema has not been updated and still stays dated as of July 5, 2024. Sounds confusing right? Utility has been updated but the logic driving it is outdated. So how can you claim section 87A tax rebate now? Read below
Does this mean you can claim section 87A tax rebate now?
Eligible taxpayers who were prevented from claiming section 87A tax rebate can now claim section 87A tax rebate by filing a revised or belated income tax return (ITR). Experts said the html based utility is the process used in the backend for processing ITR filed through the online e-filing ITR portal.
Manually edit the excel utility to claim 87A tax rebate
Manually editing the tax rebate column in the excel ITR utility seems to be the only solution for now to claim section 87A tax rebate if special rate income like short term capital gains (STCG) exists.Mihir Tanna, associate director, S.K Patodia LLP says, “The excel has certain colour coded cells which can be edited manually. The tax rebate column is one such editable cell. So if you directly leave this cell to be auto populated based on inputted information, rebate will still not be given on special rate incomes like short term capital gains. However if we edit it manually and increase the tax rebate amount taking into account the STCG and then validate the file, CPC may take it for processing. This seems to be the only way to claim an 87A tax rebate for now.”Mayank Mohanka, Founder and Director at TaxAaram India, says: “The updated version of the excel utility (offline utility) for filing ITR 2 & 3 is allowing manual editing of the Rebate amount claimed under section 87A, as on January 7, 2025. However, since json schema of July 5, 2024 has not been updated yet, the acceptability of such manually edited tax rebate claim under section 87A by the CPC processing software may be doubtful, unless some internal change has been communicated within the CPC.”
According to Barnala, Punjab based chartered accountant Himank Singla, partner, SBHS & associates, “Please note that when looked upon closely, the excel utility is still calculating tax without giving section 87A rebate against special rate income like STCG, as earlier but the taxpayer can now edit the rebate manually in the utility and file their ITRs. Challenge still remains on whether such ITRs will now be processed without any demand or with demand because the JSON schema of ITR-2 & ITR-3 still hasn’t changed after last updation on 5th July 2024 – where Rebate against special Rate incomes was unfairly removed without any prior information.
Singla says: “Still it is completely un-clear as to how the tax department and CPC will consider this new change and most importantly how ITRs will be processed.”
The e-filing ITR portal still not allowing section 87A tax rebate claims.
According to Chartered Accountant Ashish Niraj, partner, A S N & Company, “The HTML utility refers to the backend process of the online e-filing ITR portal facility. Income Tax Department has updated its website on January 7, 2025 but till 8.30 am on January 7, 2025 online ITR 2 and ITR 3 form is not allowing the rebate of 87A from STCG income if ITR is filed through the e-filing ITR portal.”
Image 1: ITR e-filing portal
CA Ashish Niraj
Source: ASN & company
“Extension was for 15 Days and 6 days have already elapsed. Extension Notification was welcome step but non update of HTML online version is preventing taxpayers from claiming the rebate as majority of individual taxpayers use online mode . It should be fixed as soon as possible” says Niraj.
Dinkar Sharma, Company Secretary & Partner, Jotwani Associates, says, “The issue surrounding the Section 87A rebate has created considerable uncertainty among taxpayers, especially those with mixed incomes, including special rate incomes like short-term capital gains. The heart of the matter lies in aligning the legislative intent of Section 87A with the operational capabilities of the ITR utility.”
Experts say the Bombay High Court’s intervention in this regard has been a crucial step. Sharma says: “Its interim relief, directing the Central Board of Direct Taxes (CBDT) to extend the deadline for revised and belated ITR filings to January 15, 2025, reflects judicial acknowledgment of the substantive rights of taxpayers. As we await the court’s final order on January 9, 2025, it is imperative for the Income Tax Department to address these operational issues comprehensively. This includes aligning the software’s processing logic with the updated utility forms and ensuring seamless claim processing for eligible taxpayers.”
