ITAT Jaipur Allows Section 87A Rebate on Short-Term Capital Gains Taxed Under Section 111A

Background and Core Issue

The Income Tax Appellate Tribunal, Jaipur Bench, in the case of Priyamvada Singhal Vs DCIT, examined whether an individual assessee, who had opted for taxation under Section 115BAC (new tax regime), could claim rebate under Section 87A against tax levied on short-term capital gains (STCG) taxable at the concessional rate under Section 111A.

The appeal arose from an order dated 04.08.2025 passed by the Commissioner of Income Tax (Appeals) under Section 250 of the Income Tax Act 1961, wherein the first appellate authority had upheld the Central Processing Centre’s (CPC) denial of Section 87A rebate on the portion of tax attributable to STCG under Section 111A.

The Tribunal ultimately held in favour of the assessee and directed that full rebate under Section 87A be allowed, including against tax computed on STCG taxable under Section 111A, where the total income falls within the prescribed threshold.

Facts of the Case

Status of the Assessee and Nature of Income

  • The assessee was an individual resident in India.
  • The assessment year involved was AY 2024-25.
  • The assessee opted to be governed by the new tax regime under Section 115BAC of the Act.

For the relevant year, the assessee disclosed income under the following heads:

  1. Capital Gains
  2. Income from Other Sources

The income streams consisted of:

  • Stipend received during training as part of the Chartered Accountancy course.
  • Interest income from bank deposits.
  • Dividend income from listed equity shares.
  • Short-term capital gains from sale of listed equity shares, taxable under Section 111A at the special rate.

The assessee’s total income (including the above STCG) remained within the monetary ceiling prescribed under Section 87A for claiming the rebate. Accordingly, the assessee claimed the full rebate under Section 87A in the return of income.

Processing of Return and CPC Adjustment

The return was processed under Section 143(1)(a) by the CPC. During such processing:

  • The CPC accepted the claim of rebate under Section 87A only to the extent of tax calculated at normal slab rates.
  • The CPC disallowed rebate against the tax portion that arose from short-term capital gains taxable at the special rate under Section 111A.

In effect, the CPC’s view was that Section 87A rebate could not be adjusted against tax levied at special rates under Section 111A, and was restricted solely to tax at ordinary slab rates.

First Appeal Before CIT(A)

Aggrieved by the CPC’s intimation, the assessee carried the matter to the Ld. CIT(A) under Section 250.

The grievance mainly related to:

  • Non-grant of rebate up to Rs. 25,000/- under Section 87A against the tax payable on STCG chargeable under Section 111A.
  • Consequential levy of interest under Section 234A, Section 234B and Section 234C.

The Ld. CIT(A) concurred with the CPC’s stance and confirmed:

  • Denial of rebate under Section 87A in respect of tax on STCG taxable under Section 111A.
  • Charging of interest under Section 234A, Section 234B and Section 234C.

Thus, the assessee was forced to approach the ITAT, Jaipur, challenging the correctness of the appellate order.

Grounds Raised Before ITAT

Before the Tribunal, the assessee raised, inter alia, the following principal grounds: