ITAT Chennai's Clarification on Section 87A: Rebate Covers Special Rate LTCG Tax for Eligible Low-Income Investors in AY 2024-25

Taxpayer Venkedapathy Venugopal filed ITR for AY 2024-25 (FY 2023-24) declaring ₹6,75,940 total income, including ₹4,72,175 LTCG from equity shares taxed at special rates under Section 112A. He claimed ₹25,000 rebate u/s 87A (new regime threshold ₹7 lakh), reducing tax to zero. CPC denied it, deeming special rate incomes ineligible; CIT(A) upheld on May 29, 2025.

ITAT Chennai (ITA No. 2064/Chny/2025) reversed, holding Section 87A rebates "total income" tax without excluding special rates like LTCG. Bench relied on prior ITAT orders (e.g., ITA 1431/Chny/2025, Aug 20, 2025) and Ahmedabad bench ruling on STCG.

Key Highlights

• Victory Path: Appeal to ITAT after CIT(A) denial; represented by CA Sanketh S. Nayak.
• ​Legal Basis: Section 87A silent on exclusions; applies to entire tax on total income ≤₹7 lakh.
• Precedents: Follows ITAT Chennai (Aug 2025) on LTCG/STCG and Ahmedabad (Aug 12, 2025) on STCG u/s 111A.
• Implications: Resident individuals can claim rebate on equity LTCG tax for AY 2024-25; potential refunds for denied cases.
• ​Expert View: Reinforces strict statutory interpretation; aids low-income equity investors.

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This ruling boosts taxpayer relief amid Budget 2025 changes limiting rebates on special incomes post-AY 2024-25.
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Sources: The Economic Times; TaxGuru.in, LinkedIn