ITR FY2023-24: I-T dept updates ITR forms to claim 87A rebates; check steps how to  go about the process

ITR FY2023-24: Taxpayers who qualify and were unable to claim the Section 87A tax rebate for the assessment year 2024-25, for the financial year 2023-24, because of recent updates in software, now have the opportunity to rectify their claims. The Income Tax Department has released revised Excel utilities for ITR Forms 2 and 3. Additionally, the department has assured that HTML utilities will be made accessible in the near future. 

Taxpayers must remember to manually edit the tax rebate column in the ITR excel utility and validate it in order to qualify for the section 87A tax rebate. Failing to do so will result in the auto-filled tax rebate column, which will disqualify you from receiving the 87A tax rebate, experts told the Economic Times.

Section 87A offers a tax rebate for individual taxpayers with a total income below Rs 5 lakhs after deductions. To ascertain eligibility for this rebate, one must calculate the taxable income after deductions. In compliance with Section 87A, taxpayers who qualify may avail rebaof rebates up to25,000 in the New Tax Regime or Rs 12,500 in the old tax system.

Individuals earning taxable incomes up to Rs 7 lakh can utilise the Section 87A rebate to eliminate their tax liability entirely.

Mihir Tanna, associate director, S.K. Patodia LLP, said: “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 considering 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.”

It was noted in the previous year that taxpayers were unable to avail of the section 87A tax rebate due to changes made by the tax department in the ITR software on July 5, 2024. Consequently, numerous eligible taxpayers either faced challenges in claiming the section 87A tax rebate or received tax demand notices for doing so. 

In the past, the Income Tax Utility Software enabled filing Income Tax Returns with rebates. However, a controversy emerged after July 5, 2024, when the income tax department changed the schema of the utility software. Subsequently, individuals who had filed their ITRs with tax rebates began receiving intimation notices for tax demands equal to the amount of rebate claimed.

The Bombay High Court intervened by directing the tax department to extend the deadline for filing revised and belated ITRs to January 15, 2025, allowing taxpayers to claim the 87A tax rebate.

The court ruled in favour of taxpayers, allowing them to submit revised returns under Section 139(5) of the Income Tax Act and retroactively claim rebates. The Income Tax Department has updated the ITR Forms 2 and 3 utilities to accommodate eligible taxpayers who wish to claim the rebate, following software changes aimed at addressing rebate claim issues.

The Finance Act 2019 increased the tax rebate threshold for individuals earning Rs 5 lakh or less to Rs 12,500 under section 87A in the previous tax regime. In the new tax regime, the tax rebate amount has been raised to Rs 25,000 for those earning Rs 7 lakh or less.

As of July 5, 2024, the rebate under section 87A does not apply to certain special rate incomes when filing income tax returns (ITR). This includes short-term capital gains on equity shares or equity-oriented mutual funds taxed at 15% under Section 111A.