Income Tax Return: Excel utilities for ITR Form 2 and 3 have been updated to enable taxpayers claiming tax exemption under section 87A of the Income Tax Act to exercise the option to update tax exemption under section 87A for FY 2023-24 (assessment year 2024-25).
Income Tax Return: There is good news for those taxpayers who are eligible to claim tax exemption under section 87A of Income Tax but were barred from claiming it after July 5, 2024. The Income Tax Department has now updated the Excel utilities for ITR Form 2 and 3 to use the option to update tax exemption under section 87A for FY 2023-24 (Assessment Year 2024-25). The Income Tax Department also said that HTML utilities will be made available soon. This information was given by the Income Tax Department recently.
One is that you have to manually edit the tax exemption column in the ITR Excel utility to claim Section 87A tax exemption and then validate it. If you leave the tax exemption column to be filled automatically, you will not get 87A tax exemption, say experts who tried all possible permutations and combinations. While experts say that this manual edit option seems to be working for now, it needs more clarity.
The whole mess of Section 87A tax rebate started when the tax department made changes to the ITR software on 5th July 2024. As a result, many eligible taxpayers were either barred from claiming the Section 87A tax rebate or were sent tax demand notices to claim it. According to a report by ET, the Hon’ble Bombay High Court granted interim relief in this regard by ordering the tax department to extend the deadline for filing revised and delayed ITRs till 15th January 2025 so that taxpayers can claim the 87A tax rebate.
According to the ET report, experts said that the root of the problem is the JSON schema which is also called the brain of the utility software as it contains logic codes. Note that the schema has not been updated till January 7, 2025 and is still dated till July 5, 2024. Sounds confusing, right? The utility has been updated but the logic that runs it is outdated. So how can you claim Section 87A tax rebate now?
Can I claim Section 87A tax exemption?
Eligible taxpayers who were barred from claiming Section 87A tax exemption can now claim Section 87A tax exemption by filing revised or delayed income tax returns (ITR). Experts said that the HTML-based utility is the process used in the backend to process ITRs filed through the online e-filing ITR portal.
Manually edit Excel utility
Manually editing the tax exemption column in the Excel ITR utility seems to be the only solution right now to claim Section 87A tax exemption if special rate income like short term capital gains (STCG) is present. According to an ET report, Mihir Tanna, associate director, SK Patodia LLP, said that there are some colour coded cells in Excel that can be edited manually. The Tax Rebate column is one such editable cell.
So even if you directly leave this cell to be auto populated based on the inputted information, special rate income like short term capital gains will not be exempted. However if we edit it manually and increase the tax rebate amount taking into account STCG and then validate the file then the CPC can take it for processing. This seems to be the only way to claim 87A tax rebate for now.