TaxTMI 
TaxTMI 
Rebate under Section 87A on Short-Term Capital Gains Taxable under Section 111A
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.... the expression "total income" in section 87A and the absence, during the relevant year, of an express exclusion for gains taxable under section 111A. • The express restriction in section 112A(6), applicable to specified long-term capital gains, could not be extended by interpretation to short-term capital gains under section 111A. • The phrase "subject to the provisions of this Chapter" in section 115BAC(1A) preserves the special-rate computation under Chapter XII. It does not, on the tribunal's reasoning, independently curtail a rebate under section 87A. • The conclusion is period-specific. The statutory text records later changes to section 87A effective from 1 April 2026, including a further pr....
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....was whether a rebate, applied after computation of income-tax, could also reduce the tax component arising from those gains. The revenue view was that income taxable at a special rate under Chapter XII was outside the rebate available under the new regime. This view was also reflected in Circular No. 13/2025, which stated that section 115BAC(1A) is subject to the other provisions of Chapter XII, that special-rate income is not included while determining chargeability under section 115BAC(1A), and that the clause in the proviso to section 87A applies to income chargeable under section 115BAC(1A). The circular contemplated rectification where rebate had been allowed on special-rate income and granted a conditional waiver of interest under ....
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....ion, notwithstanding that their tax rate is separately determined. Section 111A and the special-rate mechanism Section 111A(1) applies where total income includes capital gains arising from transfer of a qualifying short-term capital asset, including an equity share, a unit of an equity-oriented fund or a unit of a business trust, subject to the conditions stated in the provision. It does not contain language corresponding to section 112A(6) that limits the section 87A rebate. The distinction between the rate-computation rule and an express rebate restriction became central to the analysis. Section 115BAC(1A) and Chapter XII Section 115BAC(1A) begins with the formulation "Notwithstanding anything contained in this Act but subjec....
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....rate tax. The tribunal drew additional support from the deliberate contrast with section 112A(6). Parliament had expressly directed that the section 87A rebate in the case of specified long-term capital gains be calculated after reducing tax payable on those gains. Applying that restriction to section 111A would amount to supplying language that the legislature had used elsewhere but omitted here. The tribunal therefore set aside the restriction imposed in processing and directed allowance of the rebate as claimed. The meaning of the section 115BAC(1A) saving clause The expression "subject to the provisions of this Chapter" ensures that the concessional-rate framework in section 115BAC(1A) does not override the distinct charging an....
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....ification-demand cases, but its statement of the revenue's interpretation could not override the statutory language as construed by the tribunal for the period before it. The ruling therefore does not eliminate the operational relevance of the later statutory proviso or of the circular in their respective fields; it confines the adjudicated entitlement to the governing law of the relevant year. Judicial treatment of the issue In 2025 (8) TMI 842 - ITAT AHMEDABAD, the tribunal held that a resident individual under section 115BAC(1A), whose total income was within the applicable Rs. 7,00,000 threshold, could not be denied rebate merely because it included section 111A gains. It emphasised the absence of an express bar in sections 87....
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....minative. It held that a later prospective restriction did not govern the assessment year considered. Finally, 2026 (7) TMI 946 - ITAT COCHIN held that section 115BAC(1A) contained no express bar against the section 87A rebate and that the Central Processing Centre could not mechanically deny the claim merely because the taxpayer had short-term capital gains. The authority reinforces the distinction between statutory eligibility and an automated computation outcome. Practical Implications • For the period governed by the pre-restriction formulation considered by the tribunal, a claim should identify the taxpayer's resident status, election under section 115BAC(1A), total-income threshold, and the exact section 111A co....