Section 87A Rebate Available on Short-Term Capital Gains Under Section 111A: ITAT Agra Ruling — AY 2024-25

Case Background and Tribunal Reference

Case: Pramod Kumar Dubey Vs ITO (ITAT Agra)
**Appeal No.😗* ITA No.314/AGR/2025
Assessment Year: 2024-25
Order Date: 03/09/2025

The Income Tax Appellate Tribunal, Agra Bench, delivered a significant ruling in favour of an assessee by allowing the claim of rebate under Section 87A of the Income-tax Act, 1961 on Short-Term Capital Gains (STCG) taxable under Section 111A. The appeal had been filed against the order of the Addl./JCIT(A)-2, Delhi, which arose from an intimation processed under Section 143(1) by the Centralised Processing Centre (CPC), Bengaluru, for Assessment Year 2024-25.

Facts of the Case

Return Filing and Income Composition

The assessee filed a return of income under Section 139(1) of the Income-tax Act, 1961, on 10.07.2024 for AY 2024-25, declaring a total income of Rs. 6,27,260/-, structured as follows:

  • Income from Salary: Rs. 3,10,000/-
  • Long-Term Capital Gains: Rs. 99,677/-
  • Short-Term Capital Gains: Rs. 1,69,324/-
  • Income from Other Sources: Rs. 48,263/-

The assessee opted for the new tax regime under Section 115BAC(1A) of the Income-tax Act, 1961.

Rebate Claimed Under Section 87A

Since the total income of the assessee remained below the threshold of Rs. 7,00,000/-, eligibility arose for the rebate under Section 87A. The assessee accordingly claimed a total rebate of Rs. 25,000/-, which included:

  • Tax on income other than capital gains: Rs. 2,913/-
  • Tax on STCG under Section 111A: Rs. 22,087/-

The assessee paid self-assessment tax of Rs. 3,312/- as per the return filed.

Action by CPC and Denial of Rebate

During the processing of the return, the CPC, Bengaluru, disallowed the assessee's claim of rebate amounting to Rs. 22,087/- attributable to STCG under Section 111A and proceeded to raise a tax demand against the assessee. This denial appeared to be the result of a system-driven configuration update rather than any express legislative mandate.

The sole and decisive question before the Tribunal was:

Whether an assessee, being a resident individual who has opted for the new tax regime under Section 115BAC(1A) and whose total income does not exceed Rs. 7,00,000/-, is entitled to claim rebate under Section 87A of the Income-tax Act, 1961, against tax payable on STCG chargeable under Section 111A, in the absence of any express restriction in either provision?

Analysis and Reasoning of the Tribunal

No Express Restriction in Section 111A or Section 87A

The Tribunal examined the statutory language of both Section 87A and Section 111A with care. It observed that:

  • Section 111A prescribes the applicable tax rate on STCG but contains no language denying or restricting the availability of rebate under Section 87A.
  • Section 87A itself, as amended by the Finance Act, 2023 with effect from AY 2024-25, grants a rebate to a resident individual whose total income is chargeable under Section 115BAC(1A) and does not exceed Rs. 7,00,000/- — without distinguishing between normal income and income taxable at special rates.

In the absence of any restriction or prohibition in either of these provisions, the Tribunal held that the rebate under Section 87A was clearly available to the assessee.