Many small income tax-payers who are trying to revise their income tax returns before January 15 to claim the rebate under section 87A have failed to do so due to a technical glitch in the forms ITR-2 and ITR-3 utilities updated by the tax department.
According to an update on incometax.gov.in, the official e-filing portal, the HTML utilities will be updated “shortly.” Tax-payers should put their plan to revise returns on hold until then, say tax experts.
“We have tried to revise returns of some of our clients. But the utility is not auto-calculating the rebate that the tax-payers are eligible for, which should have been the case. While you can overwrite manually, this option existed even earlier. However, tax-payers (with income from short-term capital gains) who did so received tax demand notices,” says Mayank Mohanka, Founder-Director, TaxAaram.com, a tax consultancy firm.

He recommends waiting until the final disposal of the case by the Bombay High Court, which is expected to take place on January 9. Tax-payers should re-start the process only after the HTML utilities are updated. “Essentially, the tax department has not updated the JSON schema. The department has said that it will update the HTML utility, let’s see whether accurate auto-calculations are enabled once this process is complete,” he says.
At present, the issue is that tax-payers who are entitled to the section 87A rebate have to enter the figure manually. “The utilities updated on January 4 still reflect the old calculations. So, on paper, they benefit is yet to be extended. This seems to be a technical glitch which will be resolved soon,” says Abhishek Soni, CEO and Co-founder, Tax2win, a tax consultancy firm.

The story so far
On January 1, the I-T department announced that it would update the tax return-filing `utilities' for ITR 2 and 3 to allow eligible taxpayers to claim the benefit that they were denied earlier.
Put simply, many taxpayers who had ‘special rate’ incomes, such as short-term capital gains (STCG) tax @15 percent (for financial year 2023-24), were disallowed the rebate on this portion of their income while filing their returns last July. Under the old, with-exemptions regime, taxpayers earning up to Rs 5 lakh are entitled to a rebate of up to Rs 12,500. Those who choose the new, minimal exemptions regime are eligible for a rebate of up to Rs 25,000.
Rebate denied despite being eligible
For example, say, taxpayer A had a salary income of Rs 5 lakh and STCG of Rs 2 lakh on sale of shares in FY 2023-24, and filed her return on July 30. She's qualified for a tax rebate under section 87 A under the new tax regime. Had she filed her return before July 5, 2024, when the software utility was updated, she would have been allowed the rebate. However, post July 5, the updated ITR utility declined the rebate on STCG, restricting the benefit to the salary portion of the total income.
Despite representations from chartered accountants, income taxpayers, and the Institute of Chartered Accountants of India (ICAI), the tax department had not reconsidered its decision.
However, on December 20, the Bombay High Court passed an interim order directing the I-T department to extend the deadline for filing belated / revised returns by 15 days so that affected taxpayers can claim the rebate. Subsequently, the deadline was pushed to January 15, and on January 1, the I-T department announced that it will update the utilities for ITR 2 and 3.