Taxpayers face issues claiming the Section 87A rebate on STCG income due to a technical glitch in the income tax e-filing system.

Critical ITR Filing Glitch: Section 87A Rebate Unavailable for Taxpayers – Urgent Action Required!

The Income Tax e-filing portal’s recent updates to the ITR-2 and ITR-3 forms have failed to resolve a significant issue preventing taxpayers from claiming the Section 87A rebate on Short-Term Capital Gains (STCG) income. With the revised ITR filing deadline of January 15, 2025, approaching quickly, eligible taxpayers continue to face uncertainty and complications in claiming their rightful rebates. This ongoing glitch is due to outdated processing logic, and the situation remains unresolved despite the recent updates.

What is Section 87A and How Does It Affect Taxpayers?

Section 87A provides tax rebates for individual taxpayers under certain income conditions. Eligible taxpayers can claim a rebate of up to ₹25,000 under the new tax regime or ₹12,500 under the old regime. However, this rebate is currently unavailable for those who have Short-Term Capital Gains (STCG) income due to processing issues in the ITR filing system.

For most taxpayers, Section 87A is a helpful tool that reduces the tax burden. In the case of STCG income, taxpayers can utilize this provision to significantly lower their tax liabilities. But, despite the recent updates, the rebate claim has been rejected due to outdated processing logic within the system that was last updated in July 2024.

ITR Form Updates: What’s Changed?

On January 4, 2025, the Income Tax Department rolled out updated versions of the ITR-2 and ITR-3 forms, expecting to fix previous glitches preventing the rebate claims. While the e-filing utility now accepts rebate claims, taxpayers filing revised or belated returns are still facing issues, as the backend software and the processing logic behind these claims have not been updated to handle the Section 87A rebate on STCG income.

This issue has left many taxpayers frustrated, especially since they rely on this rebate to reduce their overall tax liability. Chartered accountants have voiced their concerns, highlighting that the rebate claims are still being rejected despite the updates to the income tax e-filing forms.

The Outdated ITR Processing Logic

Chartered accountant Himank Singla explained the problem to The Economic Times, stating that although the forms have been updated, the underlying processing logic remains the same. The outdated processing logic means that even revised returns filed under the new forms will still be rejected when attempting to claim the Section 87A rebate on STCG income.

Singla emphasized that filing a revised return now would not serve any purpose as the system would still reject the rebate claim, leaving taxpayers with no relief. This technical glitch is causing unnecessary stress for those eligible for the rebate but unable to claim it due to a malfunction in the processing system.

Taxpayers Await Bombay High Court’s Decision

With the deadline for revised ITR filing rapidly approaching, many taxpayers are left uncertain about their next steps. To add to the confusion, tax professionals are recommending that taxpayers wait for clarity from the Bombay High Court, which is scheduled to hear the case on January 9, 2025.

Earlier, the Bombay High Court had directed the Central Board of Direct Taxes (CBDT) to extend the filing deadline and ensure that utilities are updated to reflect the necessary changes for processing Section 87A rebates. Taxpayers are hopeful that the court’s decision will provide them with a clear path forward, allowing them to file their returns without facing rejection for rebate claims.

Consequences of Not Claiming the Rebate

If taxpayers cannot claim the Section 87A rebate on their STCG income, they could end up facing a higher tax liability than anticipated. This is particularly concerning for those who have already filed their returns or are in the process of doing so. The technical glitch leaves eligible taxpayers unable to claim the rebate, increasing their overall tax liability during an already stressful income tax e-filing period.

What Can Taxpayers Do Now?

As the January 15 deadline approaches, taxpayers are advised to stay informed about the ongoing legal proceedings and wait for the outcome of the Bombay High Court’s ruling. In the meantime, it’s important to ensure that all other aspects of the ITR filing are accurate and up to date to avoid further complications.

Tax professionals have urged taxpayers to exercise patience and closely monitor updates from the Income Tax Department. Swift action is required to resolve these glitches and ensure that eligible taxpayers are not unfairly burdened by outdated software and processing logic.

Conclusion: A Call for Swift Resolution

With the clock ticking down to the ITR filing deadline, the urgency for a swift resolution to the Section 87A rebate issue has never been greater. Clear communication from the Income Tax Department and timely software updates are crucial to ensure that taxpayers can benefit from the rebate they are entitled to. Until the processing glitch is resolved, taxpayers are advised to monitor the situation closely and wait for further guidance following the court’s decision. Only then will they know how to proceed without facing unnecessary tax burdens.

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