ITAT Clarifies 87A Rebate Applicability for Short-Term Capital Gains Below ₹7 Lakh

The Income Tax Appellate Tribunal (ITAT), Ahmedabad, has ruled that individuals with a total income not exceeding ₹7 lakh are entitled to claim the Section 87A rebate even on short-term capital gains (STCG), resolving a long-standing ambiguity.

The verdict came in response to a petition filed by Jaysree Ben, who received a tax demand of ₹15,820 despite her income being ₹6.76 lakh—below the rebate threshold. Section 87A, designed to shield low- and middle-income taxpayers from excessive tax burdens, nullifies tax liability for individuals whose total income falls below ₹7 lakh.

However, reports indicate that since July 2024, the Income Tax Department has been routinely rejecting 87A claims on STCG, citing procedural interpretations. This has led to several taxpayers receiving tax notices despite qualifying for the rebate.

With similar cases surfacing across the country, community groups and tax experts are urging the government to issue a clarifying circular to prevent undue litigation and protect eligible taxpayers from erroneous assessments.