ITR Filing Deadline Extended: Relief for Taxpayers Eligible for Section 87A Rebate

The Honourable Bombay High Court recently intervened to address a pressing issue affecting taxpayers eligible for the Section 87A rebate. The court has ordered the Central Board of Direct Taxes (CBDT) to extend the due date for filing revised and belated income tax returns (ITRs) to January 15, 2025. This interim relief ensures that affected taxpayers can exercise their right to claim the rebate, despite procedural hurdles.

Background: Section 87A Tax Rebate Issue

The Section 87A tax rebate allows taxpayers to reduce their tax liability if their income falls below specific thresholds. Under the old tax regime, the rebate is up to ₹12,500 for incomes up to ₹5 lakh, while under the new regime, the rebate is ₹25,000 for incomes up to ₹7 lakh.

The issue arose after July 5, 2024, when the CBDT modified its ITR filing utility software for Assessment Year 2024-25. This change effectively disabled taxpayers from claiming the rebate for certain special rate incomes, including short-term capital gains taxable under Section 111A at 15%. Consequently, many eligible taxpayers were denied the rebate, prompting legal action.

Bombay High Court’s Intervention

In response to a Public Interest Litigation (PIL) filed by The Chamber of Tax Consultants, the Bombay High Court provided interim relief on December 20, 2024. The court directed the CBDT to immediately issue a notification under Section 119 of the Income Tax Act, extending the filing deadline to January 15, 2025.

The court stated:

“By way of interim relief, the respondent, Central Board of Direct Taxes is hereby directed to forthwith issue requisite notification under Section 119 of the Act extending the due date for e-filing of the income-tax returns in relation to the assessees who are required to file a return of income by December 31, 2024, at least to January 15, 2025. This extension is to ensure that all taxpayers eligible for the rebate under Section 87A are afforded the opportunity to exercise their statutory rights without facing procedural impediments.”

The Core Issue: Arbitrary Software Changes

The Chamber of Tax Consultants highlighted that the utility software for filing ITRs was altered midway through the assessment year, creating significant difficulties for taxpayers. Typically, these utilities are released before the financial year ends to give taxpayers ample time to file their returns.

The modifications, implemented mid-year, disrupted taxpayers’ ability to claim the Section 87A rebate. Since online filing is mandatory, this change left taxpayers unable to exercise their rights, leading to financial and procedural hardships.

A Step Towards Justice

This order underscores the importance of holding authorities accountable for arbitrary decisions. By extending the filing deadline, the Bombay High Court has ensured that taxpayers are not penalized for issues beyond their control.

While this is an interim relief, the final judgment, expected on January 9, 2025, will provide further clarity. In the meantime, taxpayers eligible for the Section 87A rebate should take advantage of this extended deadline to file or revise their ITRs.

This case serves as a reminder that vigilance and action are crucial when safeguarding taxpayer rights.