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Jan 07, 2026
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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
The Section 87A tax rebate has sparked quite a debate, especially among those with long term capital gains (LTCG) from equity or debt mutual funds. The Budget 2025 clearly stated that the Section 87A tax rebate is off the table for LTCG on equity mutual funds, but it didn’t apply this in retrospective cases. So, it’s now up to the courts and tribunals to decide.
The explanatory memorandum to Budget 2025 said: "The provisions of sub-section (1A) of section 115BAC are subject to the other provisions of Chapter XII i.e. determination of tax in certain special cases. Hence, proviso to section 87A clearly provides that tax on incomes chargeable at special rates (for e.g.: capital gains u/s 111A, 112 etc.) as specified under various provisions of Chapter XII, are not included while determining the rebate of income-tax under the first proviso to section 87A."
This case mentioned in this article involves the denial of the Section 87A tax rebate on LTCG from debt mutual funds from debt mutual funds and how a taxpayer won the case. In this particular case (no. ITA No.887/CHANDI/2025), the ITAT Chandigarh ruled on December 10, 2025 that the Section 87A tax rebate claim on LTCG from debt mutual funds was valid.
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