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The 87A Story


Till 5th July if the ITR filed under new tax regime then rebate of Rs.25,000 is available if Total Income including special income is up to Rs.7,00,000 

From 5th July onward the rebate u/s 87A was not available for special income in New Tax Regime

Effect of Above Change 
-ITR filed before 5th July and Processed before 5th July got the benefit of rebate u/s 87A
-ITR filed before 5th July with rebate u/s 87A were getting processed now with tax demand to the extent of tax on special income
-ITR filed before 5th July where rebate was not given because total income (normal+special) was above 7 lakh but normal income was up to 7 lakh were getting processed with refund because department considering the 7 lakh income limit for normal income only

Till 15th July majority of tax payers have filed ITR with rebate u/s 87A for special income now all are getting demand to the extent of rebate claimed on special income

Now Tax Payers can't change the regime from new to old because the due date u/s 139(1) is already over

Software were changed with new interpretation from 15th july onward (Till 5th july already approx 1.5 crore tax payers have filed their ITR and Till 15th july already approx 3 crore tax payers have filed their ITR) and out of above so many have special income and claimed rebate u/s 87A

IncomeTaxIndia new interpretation of section 87A giving rebate of Rs.25,000 to the tax payer even if Gross Total Income was Rs.57,00,000 
(Salary Rs.7,00,000+STCG Rs.50,00,000)

Liberal Interpretation of Section 87A was that if tax payer have opted for New Tax Regime then Rebate of Rs.25000 allowed subject to Total Income up to Rs.7,00,000

But from 5th July onward this interpretation was changed and total income was divided in 2 part (Total Income taxable at Slab Rate AND Total Income taxable at Special Rate) and as a result of this Rebate was not provided against STCG even if Total Income was up to Rs.7,00,000 and in some cases Rebate was allowed even if Total Income (including STCG) was more than Rs.7,00,000

What Next
The only option left is to pay that tax demand unless department change it's interpretations of 87A

To Pay Tax
Go to e-File -> e-Pay Tax -> New Payment -> Select respective DRN in tile 'Demand Payment as Regular Assessment Tax'
or
Go to Pending Actions -> Response to Outstanding Demand and Click on Pay Bow option

Any payment with respect to outstanding demand should be paid using minor head code '400' only.

After Payment of Taxes don't forget to give response in Response to Outstanding Demand with challan payment details

Before 5th July 2024, rebates were granted even on special income under the new tax regime. However, after the change, the rebate is only for normal income, and special income (like capital gains) is excluded. This has led to tax demands for many who claimed the rebate incorrectly.

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