Section 87A Rebate Applicable to Short-Term Capital Gains Under Section 111A for AY 2024-25 — ITAT Mumbai
Case Background
Case: Pushpa Prakash Misar Vs ITO (ITAT Mumbai)
Assessment Year: 2024-25
Order Date: 23-03-2026
The Income Tax Appellate Tribunal, Mumbai Bench, recently delivered a significant ruling in favour of the assessee by holding that the rebate under Section 87A of the Income Tax Act, 1961 is available even where the total income of a resident individual includes Short-Term Capital Gain (STCG) chargeable to tax at special rates under Section 111A. The Tribunal set aside the order of the Addl./JCIT(A), Agra, dated 21.11.2025, which had upheld the disallowance of the rebate by the Centralised Processing Centre (CPC).
Facts of the Case
The assessee, a resident individual, filed her return of income on 12.07.2024 for AY 2024-25, declaring a total income of ₹4,77,910. This total income consisted of:
- **Short-Term Capital Gain (STCG)😗* ₹3,17,552 — chargeable at special rates under
Section 111A - Income from Other Sources: ₹1,60,354
After claiming a rebate of ₹25,000 under Section 87A, the net tax liability was computed at ₹1,754. The assessee had opted for the new tax regime under Section 115BAC(1A) and satisfied the threshold condition of total income not exceeding ₹7 lakh.
However, when the CPC processed the return under Section 143(1) on 24.02.2025, the rebate was denied on a system-driven basis. The first appellate authority — the Addl./JCIT(A), Agra — confirmed the disallowance. Aggrieved, the assessee filed an appeal before ITAT Mumbai.
Contentions of the Assessee
The Authorised Representative for the assessee advanced the following arguments before the Tribunal:
Statutory Language of Section 87A
- The first proviso to
Section 87A, as inserted by the Finance Act, 2023 with effect from AY 2024-25, grants a rebate to a resident individual assessed underSection 115BAC(1A)whose total income does not exceed ₹7 lakh. - The expression used in the proviso is "total income" — without any carve-out or exclusion for income taxable at special rates under Chapter XII of the Income Tax Act, 1961.
- The provision does not differentiate between income chargeable at slab rates and income chargeable at special rates such as STCG under
Section 111A.
Comparison with Section 112A
Section 112A(6)contains an express restriction providing that rebate underSection 87Ashall not be available against tax payable on long-term capital gains exceeding ₹1 lakh covered under that section.- No analogous restriction appears in either
Section 111AorSection 87Ain relation to STCG. - This legislative contrast demonstrates that where Parliament intended to deny the rebate, it has done so explicitly.
Prospective Nature of Finance Act, 2025 Amendment
- The Finance Act, 2025 proposed to amend
Section 87Ato deny the rebate in respect of all special-rate income, including income underSection 111A, but only with effect from AY 2026-27. - This prospective amendment itself confirms that no such restriction existed under the law applicable to AY 2024-25.