On 16th July 2024, the Direct Taxes Committee of the Institute of Chartered Accountants of India (ICAI) submitted a representation to the Central Board of Direct Taxes (CBDT) requesting the allowance of rebate under Section 87A for short-term capital gains chargeable under Section 111A and long-term capital gains chargeable under Section 112. This request is aimed at providing relief to taxpayers under the New Tax Regime.
Background and Justification
The ICAI, as a pivotal institution in the realm of taxation, plays a crucial role in highlighting taxpayer concerns to the government. In this instance, the ICAI emphasizes the hardships faced by taxpayers due to the lack of rebate applicability on certain capital gains under the new tax regime.
Rebate under Section 87A is designed to provide relief to resident individuals whose total income does not exceed a specified limit. As per the normal provisions of the Act, the maximum rebate available is Rs.12,500 if the total income does not exceed Rs.5 lakhs. The alternative tax regime under Section 115BAC (commonly referred to as the New Tax Regime) also offers this rebate, with a proviso extending the benefit to individuals whose total income does not exceed Rs.7 lakhs.
However, under the current regulations, the rebate under Section 87A does not apply to incomes that are taxed at special rates, such as short-term capital gains under Section 111A and long-term capital gains under Section 112. This exclusion has been a point of contention, as it affects taxpayers who would otherwise benefit from the rebate.
ICAI’s Representation
The ICAI’s representation to the CBDT brings attention to the marginal relief needed for taxpayers who have income just above the Rs.7 lakh threshold under the new tax regime. The representation requests that the rebate under Section 87A be extended to include short-term capital gains under Section 111A and long-term capital gains under Section 112, thereby aligning the tax relief measures with the overarching goal of the new tax regime to simplify and provide equitable relief.
The request highlights that the current exclusion of these capital gains from rebate eligibility creates an inconsistency in the tax relief framework, thereby causing undue hardship to taxpayers who might otherwise benefit from the rebate.
The ICAI’s proactive approach in addressing this issue underscores its commitment to ensuring fair and equitable treatment for taxpayers. By advocating for the extension of rebate benefits under Section 87A to include special rate incomes, the ICAI aims to bring much-needed relief to a broader segment of taxpayers under the new tax regime.
As the CBDT reviews this representation, taxpayers and professionals alike are hopeful for a positive response that will enhance the equity and fairness of the Indian tax system.
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