Tax Utility updated to allow Tax Rebate 87A as per Bombay HC decision - what to do now?

Summary

The video discusses a recent ruling by the Bombay High Court regarding the eligibility of taxpayers to claim the Section 87A rebate under the new tax regime. Initially, the government’s tax utility allowed such claims, but an update after July 5, 2024, restricted some taxpayers from claiming the rebate. Legal action was taken, resulting in the High Court's interim order mandating that the utility be updated to allow the rebate. Taxpayers who filed their returns before July 5, 2024, are now advised to revise their returns by January 15, 2025, to claim the rebate under the new regime.

Takeaways

• 😀 Bombay High Court ruled that the government's tax utility should allow taxpayers to claim the Section 87A rebate, even under the new tax regime for FY 2023-24.
• 😀 Before July 5, 2024, the tax utility allowed taxpayers to claim the 87A rebate in both old and new tax regimes, but after July 5, 2024, the utility restricted some claims.
• 😀 The controversy arose because the tax utility changed after July 5, 2024, preventing the rebate for certain cases like short-term capital gains tax, even though the law didn't change.
• 😀 Several representations from tax chambers and organizations like ICI and the Chamber of Commerce were made to seek clarification, but the government did not offer an explanation.
• 😀 On October 14, 2024, a case was filed in the Gujarat High Court, challenging the government's utility update, as many taxpayers were affected by the sudden change.
• 😀 Senior Advocate SH Soraer successfully argued that it would be impractical for every affected taxpayer to file individual petitions, leading to a case being filed on behalf of affected taxpayers.
• 😀 On December 28, 2024, the Bombay High Court issued an interim order stating that the government's tax utility must allow taxpayers to claim rebates under Section 87A for the new tax regime.
• 😀 The court directed the government to update the utility and extend the deadline to January 15, 2025, to allow taxpayers to claim the rebate under the new regime.
• 😀 Despite the interim order, the final ruling from the Bombay High Court is still pending, with the next hearing set for January 14, 2025.
• 😀 Taxpayers can now update or revise their returns, ensuring they claim the rebate under the new regime without facing restrictions due to the updated utility.

Q & A

What is the controversy discussed in the video regarding Section 87A and the tax utility?

The controversy revolves around the government's tax utility not allowing taxpayers to claim the Section 87A rebate under the new tax regime after the update on 5th July 2024. Prior to this date, the utility allowed the rebate to be claimed under both old and new regimes, but post-update, certain cases, like those involving short-term capital gains, were excluded from the rebate, causing confusion and concern among taxpayers.

What action did the Bombay High Court take regarding the issue with the tax utility?

The Bombay High Court issued an interim order on 28th December 2024, directing the government to update the tax utility to allow taxpayers to claim the Section 87A rebate under the new regime. The court specified that this change should be implemented by 15th January 2025.

What is the significance of the 5th July 2024 update to the tax utility?

The 5th July 2024 update to the tax utility led to a situation where taxpayers who filed returns after this date under the new regime could not claim the Section 87A rebate, especially in cases involving short-term capital gains or other specific conditions. This caused discrepancies in how the rebate was applied and led to the legal challenge.

What was the role of various tax bodies in addressing the issue?

Various tax bodies, such as the Institute of Chartered Accountants of India (ICAI) and tax chambers across India, raised representations to the government, seeking clarification. They argued that the restriction on claiming the Section 87A rebate was unjust and affected a large number of taxpayers. Despite these efforts, no formal explanation was provided by the government.

What was the impact of the Bombay High Court's interim order on taxpayers?

The interim order by the Bombay High Court allowed taxpayers to revise their returns and claim the Section 87A rebate under the new regime, even for cases affected by the tax utility issue. The court's ruling provided a clear path for taxpayers to correct their returns and access the rebates they were eligible for.

Can taxpayers still revise their returns after 5th July 2024, according to the court's order?

Yes, according to the Bombay High Court's interim order, taxpayers who filed their returns after 5th July 2024 under the old or new regime, and were unable to claim the rebate due to the tax utility issue, can now revise their returns and claim the rebate as per the updated utility.

What steps should taxpayers take if they were affected by the utility update before 5th July 2024?

Taxpayers who filed their returns before 5th July 2024 under the old or new regime and were denied the Section 87A rebate can revise their returns using the updated tax utility. If the rebate was allowed in the new regime before 5th July, no further action is needed unless a demand notice was issued.

Why is the 15th January 2025 deadline significant for taxpayers?

The 15th January 2025 deadline is significant because it is the last date for taxpayers to file their revised returns and claim the Section 87A rebate as per the Bombay High Court's interim order. This date may be extended further, but taxpayers should act before it to ensure they do not miss the opportunity.

What should taxpayers do if they receive a demand notice related to their Section 87A rebate claim?

If taxpayers receive a demand notice related to the Section 87A rebate, they should review their return and, if necessary, revise it using the updated tax utility. The Bombay High Court's order allows for claims to be made as per the law, and taxpayers should correct any discrepancies in their filings.

What is the final legal status of the issue as of the video date?

As of the video date, the Bombay High Court has not yet issued a final order. However, the interim order directing the government to update the tax utility to allow the Section 87A rebate is in place, and taxpayers can use this interim relief to file revised returns before the 15th January 2025 deadline.