An important update for Indian taxpayers: A wealth advisor is suggesting that the Section 87A rebate on capital gains from mutual funds might still be available for FY25.
This controversial position is based on a recent ruling from the Ahmedabad ITAT, which argues that the law explicitly barring this rebate on special-rate incomes only takes effect from FY26. This means that for both FY24 and FY25, investors could technically be eligible for the up to ₹12,500 rebate, provided their total income is within the specified limit.
However, there’s a significant catch: the Income Tax Department may not agree. In FY24, the department’s tax utilities didn’t permit this rebate until a Bombay High Court directive forced them to. Taxpayers who claim this rebate for FY25 should be prepared for potential scrutiny and may have to defend their position.
Beyond the rebate debate, here are a few key takeaways for taxpayers:
- File by the deadline: The deadline to file your Income Tax Return (ITR) is September 15.
- Carry forward losses: Timely filing is essential if you want to carry forward any capital losses to offset future gains for up to eight years.
- Reconcile your data: Always cross-verify the details in your ITR with your Annual Information Statement (AIS) to avoid discrepancies and potential notices.
This may be the last opportunity to claim this specific rebate, but given the high risk of departmental pushback, investors must weigh the potential tax savings against the possibility of a legal challenge.