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Sep 25, 2025
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Claimed Section 87A tax rebate on STCG? Expect a tax demand notice from I-T dept; Here’s what you can do
On September 19, 2025, the Central Board of Direct Taxes (CBDT) via Circular No. 13 /2025 gave relief to taxpayers from paying interest on tax demand notices related to the Section 87A tax rebate for special rate incomes like Short Term Capital Gains (STCG) on equities. However, the same circular states that taxpayers who received such a tax demand notice must pay by December 31, 2025 so as to become eligible for the waiver of interest.
Additionally, the circular mentions that if the ITR was processed and Section 87A tax rebate was granted on such special rate incomes (like STCG), rectifications have to be done disallowing such 87A tax rebate claims since they were mistakenly approved. Consequently, that circular said that tax demand notices will be issued, and interest under Section 220(2) will be applied to these tax demands.
S. Vasudevan, Executive Partner at Lakshmikumaran & Sridharan attorneys, says: “The CBDT in its recent circular (13 of 2025) has stated that rectifications have to be carried out by Central Processing Center (CPC) to disallow Section 87A tax rebate which was allowed to the taxpayers against income chargeable to tax at special rates. Considering this recent Circular issued by CBDT, it is likely that taxpayers will receive a demand notice with respect to rebate allowed under section 87A.”
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