Full Section 87A tax rebate on LTCG from equity income for AY 2024-25 allowed by ITAT Chennai; know how the taxpayer won

On July 26, 2024, Mr Venugopal from Tamil Nadu, filed his income tax return (ITR) for the Assessment Year 2024-25, declaring a total income of Rs 6,75,940. He also claimed a Section 87A tax rebate of Rs 25,000 and thus effectively paid no tax. His ITR included income from long-term capital gains of Rs 4,72,175, and the tax rebate he claimed was attributable to the tax due on such capital gains.

Then, on April 15, 2025, the ITR was processed by the centralised processing centre (CPC) and rejected the Rs 25,000 tax rebate he had claimed. They issued an intimation notice but didn’t clearly spell out why the rebate was denied.

Unhappy with the denial, Mr Venugopal decided to appeal to the CIT(A). The CIT(A) on May 29, 2025, issued its ruling and confirmed the CPC’s decision to deny him Section 87A tax rebate claim on LTCG.


The CIT(A) held that the benefit of rebate under Section 87A is not available for incomes chargeable at special rates of tax, which are included in the total income. According to the CIT(A), rebate under Section 87A is available only to incomes specified under sub-section (1A) of Section 115BAC.

The aggrieved taxpayer (Mr Venugopal) then filed an appeal in ITAT Chennai and he won the case. CA Sanketh S. Nayak represented the taxpayer.

Also read: Section 87A rebate on capital gains from debt mutual fund: ITAT Chandigarh gives relief to taxpayer and cancels Rs 25,710 tax demand notice from Income Tax Dept

ITAT Chennai analysis and discussion

ITAT Chennai in their judgement (ITA No.:2064/Chny/2025) dated October 9, 2025 said that the sole issue arising for their adjudication is whether the assessee is entitled to a rebate on tax under Section 87A where the total income consists, inter alia, of income chargeable to tax at special rates.

ITAT Chennai noted that their tribunal in an earlier case [ITA No.1431/Chny/2025, order dated 20.08.2025] held that the provisions of Section 87A provide rebate on the entire tax liability computed on the “total income” without drawing any distinction between income taxable at normal rates and income taxable at special rates.

It was accordingly concluded that rebate under Section 87A is available even in case of incomes taxed under special provisions.

Further, ITAT Chennai said that they find support from the decision of the Coordinate Bench in Jayshreeben Jayantibhai Palsana Shingala Sheri v. ITO [ITA No.1014/Ahd/2025, order dated 12.08.2025]

Also read: Section 87A tax rebate can be claimed for short term capital gains income under new tax regime, rules ITAT Ahmedabad

ITAT Chennai Judgement

ITAT Chennai said that following the ratio laid down in the above cases, they hold that the assessee in the instant case is entitled to rebate under Section 87A for the impugned assessment year, notwithstanding that the total income includes taxable long term capital gains chargeable at special rates.

Judgement: “The AO is accordingly directed to allow the rebate of Rs 25,000 claimed by the assessee u/s.87A of the Act and recompute the tax liability. Thus, the grounds of appeal raised by the assessee are allowed. In the result, the appeal of the assessee is allowed. Order pronounced in the open court on 09th October, 2025 at Chennai.”

What does this mean for others who claimed Section 87A tax rebate on LTCG, STCG prior to FY 2024-25?

Sachin Vasudeva, Senior PartnerSCV & Co. LLP, said to ET Wealth Online: A beneficial view has been taken by the Hon’ble ITAT Chennai Bench in (ITA No. 2064/Chny/2025), wherein it was held that Section 87A grants rebate on the tax computed on “total income” without distinguishing between normal-rate and special-rate incomes, thereby allowing rebate even on income taxed under special provisions.

Vasudeva says: “Nevertheless, in light of the prevailing majority judicial view, rebate under Section 87A is not available in respect of income taxable under Section 112A, while such rebate remains available for income taxable under Sections 111A and 112 up to FY 2024–25, subject to fulfillment of the conditions prescribed under Section 87A.”

According to Vasudeva, for taxpayers, this means that while rebate under Section 87A cannot be claimed against tax arising from Section 112A gains, it may still be available against tax on other special rate incomes, provided the conditions of Section 87A are otherwise satisfied.

Vasudeva says: “The judgment therefore helps taxpayers structure their tax computations correctly, reduces the risk of erroneous claims and subsequent litigation, and reinforces the principle that specific statutory exclusions must be strictly construed and cannot be extended by implication.”