Taxpayers Will Soon Be Able to Claim Section 87A Rebate With New Forms for FY2023-2024

In a significant development for taxpayers eligible for the Section 87A tax rebate, the Income Tax Department has announced a key update regarding the financial year 2023-24. On December 31, 2024, the department confirmed that taxpayers who were unable to claim the rebate within the original time frame can now file revised or belated Income Tax Returns (ITRs) to benefit from this rebate. This move comes after a ruling by the Bombay High Court, which directed the department to extend the deadline for such claims.

Court Ruling and Procedural Updates 

The Bombay High Court’s ruling was based on concerns that procedural changes introduced by the Income Tax Department hindered taxpayers’ ability to claim their rightful Section 87A rebate. Section 87A allows taxpayers with taxable incomes up to ₹7 lakh to reduce their tax liability to zero, but recent software updates have created difficulties for individuals seeking the rebate. The court emphasised that the department’s modifications went against the spirit of the rebate, which was designed to provide relief to taxpayers. The Income Tax Department had defended the software changes, stating that they were necessary to address specific issues with rebate claims and to ensure compliance with legal provisions.

Extended Deadline and Updated Utilities

In response to the court’s directive, the Central Board of Direct Taxes (CBDT) has extended the deadline for filing belated and revised ITRs for the assessment year (AY) 2024-25. The new deadline has been moved from December 31, 2024, to January 15, 2025. The Income Tax Department also confirmed that the updated ITR filing utilities for forms 2 and 3, which will include the option to claim the Section 87A rebate, will be made available soon.

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