As taxpayers prepare for filing their Income Tax Return (ITR) for FY 2024–25 (AY 2025–26), many individuals are asking an important question:
👉 Can Section 87A rebate be claimed manually if income includes Short-Term Capital Gains (STCG)?

This confusion arises because while Section 87A provides relief to small taxpayers, STCG under Section 111A (on equities, equity mutual funds, etc.) is taxed at a flat 15%, which creates doubts about rebate applicability. Let’s clear the confusion step by step.

📌 What is Section 87A Rebate?

• Section 87A offers a rebate of up to ₹12,500 if the taxpayer’s total taxable income (after deductions) is ₹5 lakh or below.

• Under the new regime, this rebate limit is enhanced for incomes up to ₹7 lakh.

• This rebate directly reduces the tax liability to zero for eligible taxpayers.

🔎 Treatment of STCG Under Section 111A

• Short-Term Capital Gains (STCG) on sale of listed equities and equity mutual funds (held < 12 months) are taxed at 15% (plus surcharge & cess).

• The confusion: Can taxpayers adjust this liability with 87A rebate if their total income is below the rebate threshold?

✅ Can Section 87A Rebate Be Claimed on STCG?

Yes, Section 87A rebate is available even if the income includes STCG, provided the total taxable income (including capital gains) does not exceed the prescribed threshold.

• Example:

  • Total income (including STCG) = ₹4,80,000

  • Tax liability (including 15% on STCG) = ₹6,500

  • Since income < ₹5,00,000, rebate u/s 87A applies → Net tax = ₹0

⚠️ Important: If income exceeds the threshold, even by ₹1, the rebate is not available.

📝 Can It Be Claimed Manually?

• When filing ITR online, the system automatically calculates rebate u/s 87A if you are eligible.

• Manual claim is not required—but if you are filling in offline forms or paper return, you can enter the rebate manually under the "Rebate and Relief" section.

• Always ensure income details and STCG are entered correctly for proper computation.

📊 Key Points for FY25

• Old Regime: Rebate for total income ≤ ₹5 lakh.

• New Regime: Rebate for total income ≤ ₹7 lakh.

• STCG u/s 111A taxed @15% but eligible for rebate if total income ≤ threshold.

• Rebate reduces tax liability to zero but does not create a refund beyond tax paid.