ITAT Jaipur Rules in Favour of Assessee: Section 87A Rebate Applicable on Short-Term Capital Gains Taxed Under Section 111A for AY 2024-25

A significant ruling has emerged from the Jaipur Bench of the Income Tax Appellate Tribunal in Aman Dani Vs ITO (ITAT Jaipur), ITA No. 1093/JPR/2026, decided on 11 September 2026, concerning the eligibility of the Section 87A rebate against income-tax computed on short-term capital gains (STCG) chargeable at the special rate under Section 111A of the Income Tax Act, 1961.

The core question before the Tribunal was straightforward yet consequential: can a resident individual, assessed under the new tax regime and having total income below ₹7 lakh for Assessment Year 2024-25, claim the Section 87A rebate against tax arising from Section 111A STCG — where the statute contained no express prohibition on such a claim?

The Tribunal answered in the affirmative, holding that the Centralised Processing Centre (CPC) had no legislative authority to deny a benefit that Parliament had not restricted for the relevant year.

Facts of the Case

The assessee, Aman Dani, filed her return of income for AY 2024-25 on 21.07.2024 under the new tax regime in accordance with Section 115BAC of the Income Tax Act, 1961. The declared total income stood at ₹4,54,020, which included short-term capital gains from listed securities falling within the ambit of Section 111A.

The gross STCG was reported at ₹2,45,610. After relevant adjustments, the taxable portion of STCG was determined at ₹1,53,461, on which tax was computed at the special rate of 15%, resulting in a tax liability of ₹23,019. Since the assessee's total income was below the ₹7 lakh threshold, she claimed an equivalent rebate of ₹23,019 under Section 87A.

CPC's Intimation Under Section 143(1)

The CPC processed the return under Section 143(1) vide intimation dated 23.09.2024, accepting the total income as declared but denying the Section 87A rebate of ₹23,019 in its entirety. The CPC's computation framework excluded income chargeable at special rates from the rebate-eligible income, arriving at:

Particulars Amount (₹)
Total income as computed 4,54,020
Less: Income chargeable at special rates 2,46,171
Balance income taxable at slab rate (eligible for rebate) 2,07,849
Eligible Section 87A rebate on balance income 0

Since the assessee had no tax liability on normal-slab-rate income, the CPC treated the entire rebate entitlement as nil.

Rectification and First Appeal

A rectification application filed under Section 154 was dismissed by the CPC without any modification to the original computation. The assessee appealed before the Commissioner of Income Tax (Appeals), who upheld the CPC's action.

CIT(A)'s Reasoning — Rebate Confined to Slab-Rate Tax

The CIT(A) relied on the proviso inserted in Section 87A by the Finance Act, 2023, operative with effect from 01.04.2024, to hold that the rebate was admissible only in respect of tax computed under the normal slab rates of Section 115BAC(1A).

The reasoning proceeded as follows:

  • Section 115BAC is an overriding provision but operates subject to the provisions of Chapter XII of the Income Tax Act, 1961.
  • Section 111A, Section 112 and Section 112A fall under Chapter XII and impose tax at specified special rates.
  • Tax determined under these provisions is therefore distinct from tax computed at normal slab rates under Section 115BAC(1A).
  • Consequently, the Section 87A rebate — which the CIT(A) read as applicable only to slab-rate tax — could not be set off against STCG tax of ₹23,019 arising under Section 111A.

The CIT(A) also placed reliance on Circular No. 15/2025 dated 17th September, 2025, issued by the Central Board of Direct Taxes (CBDT), which stated: