Section 87A rebate on long-term capital gains turns on express statutory exclusion and prospective amendment

Resident individuals under the new tax regime were examined for rebate eligibility where total income remained below the prescribed threshold but included long-term capital gains taxed under section 112. The text states that "total income" must be read with sections 2(45) and 5, so capital gains forming part of total income are not excluded from section 87A rebate unless the Act expressly says so. It notes that the statute specifically denies rebate for certain special-rate income in section 112A(6), but contained no comparable exclusion for section 112 for the relevant year. The later Finance Act, 2025 amendment was treated as prospective, and the denial of rebate was set aside.

---

---

Issues: Whether a resident individual who opted for the new tax regime and whose total income was below the prescribed threshold was entitled to rebate under section 87A in respect of long-term capital gains taxable under section 112, despite the absence of an express bar in the statute for such income.

Analysis: The statutory expression used in section 87A is "total income", which is to be understood in the sense defined by section 2(45) read with section 5 of the Income-tax Act, 1961. Once long-term capital gains form part of the assessee's total income, they cannot be excluded from the rebate computation unless the statute expressly so provides. The legislative scheme shows that where rebate is intended to be denied for special-rate income, the Act says so specifically, as in section 112A(6). No corresponding exclusion exists for section 112 for the year under consideration. The later amendment brought by the Finance Act, 2025 was treated as prospective and not as a basis to deny a benefit that was otherwise available under the unamended law.

Conclusion: The assessee was held entitled to rebate under section 87A on tax payable on long-term capital gains under section 112, and the denial of rebate was set aside.

---