Rebate under section 87A applies to short-term capital gains tax absent an express statutory exclusion.

Rebate under section 87A is linked to total income and, in the absence of an express statutory exclusion, can apply to tax on short-term capital gains taxed under section 111A where the assessee's total income stays within the prescribed limit under the new tax regime. The text notes that total income includes income under all heads, including capital gains, and that the Legislature used explicit exclusionary language in section 112A(6) when it intended to deny rebate. It treats the Finance Act, 2025 amendment as prospective and confirmatory of the earlier position. Processing of the return was therefore said to have wrongly denied the rebate and the consequential demand was to be deleted.

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Issues: Whether rebate under section 87A of the Income-tax Act, 1961 is allowable against tax payable on short-term capital gains taxable under section 111A of the Income-tax Act, 1961 when the assessee's total income does not exceed the prescribed threshold and the return is filed under the new tax regime under section 115BAC(1A) of the Income-tax Act, 1961.

Analysis: The rebate under section 87A is linked to the assessee's total income. Total income, as defined under section 2(45) read with section 5, includes income chargeable under different heads, including capital gains. For the year in question, neither section 87A nor section 111A contained any express prohibition denying rebate on tax attributable to short-term capital gains. By contrast, section 112A(6) specifically imposes a restriction where the Legislature intended to curtail the rebate, showing that such exclusion is explicit when intended. The later amendment brought by the Finance Act, 2025 was treated as prospective and as confirming the absence of any earlier statutory bar.

Conclusion: Rebate under section 87A could not be denied in respect of tax payable on short-term capital gains under section 111A, and the denial made while processing the return was held unsustainable. The assessee was entitled to the rebate and the consequential demand was directed to be deleted.

Ratio Decidendi: Where the statute grants rebate with reference to total income and does not expressly exclude special-rate capital gains, the rebate cannot be denied by implication; an exclusion must be found in the text of the Act itself.

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