Tax Column

For filing return for financial year 2025-26 relevant to assesSMEnt year 2026-27, I have to consider which Act, i.e., 1961 or 2025? Also explain to me the provisions relating to rebate under section 87A and whether the same is applicable while computing the income for assessment year 2026-27? [EasyDNNnews:PaidContentStart] 

Although the I T Act 2025 has come into force with effect from April 1, 2026, the provisions of this new Act apply only to financial years starting after April 1, 2026. As such, transactions relating to the financial year 2025-26 fall under the ambit of the I T Act 1961. Therefore, while filing your Tax return for assessment year 2026-27, you have to consider the provisions of the I T Act 1961. 

Rebate under section 87A of the I T Act 1961 is available for financial year 2025 26 (assessment year 2026-27) only to resident individuals. As you are an individual, rebate under section 87A is applicable in your case, provided your total income does not exceed ₹12 lakh per annum. Income which is subject to a special rate of taxation, such as short term capital gain, long-term capital gain, etc., is outside the purview of the limit of ₹12 lakh per annum. In other words, if your income which is subject to slab rate is less than ₹12 lakh, then you can get the benefit of rebate under section 87A and tax payable would be nil. Kindly ensure that this rebate is available only if you have adopted the new tax regime under section 115BAC. If you adopt the old regime, then the upper income limit is ₹5 lakh. 

I am a Non-resident Indian and at present settled in Dubai. I own a residential house in Mumbai which I propose to sell. I am likely to make long-term capital gain of ₹8 crore. Can I reinvest the capital gain in another residential property in Mumbai to get capital gain benefit? Further, how to stop the buyer from deducting withholding tax on the sale consideration of my Mumbai property? 

As you are an Indian citizen and a non resident individual, the entire long-term capital gain of ₹8 crore can be reinvested by you in a new residential property within two years from the date of transfer of your existing property. Under section 82 of the I T Act 2025 (corresponding to section 54 of the I T Act 1961), if an individual makes long-term capital gain on sale of a residential property and reinvests the entire capital gain in a new residential property, then the entire capital gain is exempt from tax. The individual referred to in section 82 includes non-resident individuals also. 

For requesting non-deduction of withholding tax from the sale consideration of your existing property, you may have to approach the Income Tax Department under section 395 read with section 400 of the I T Act 2025 for nil or lower deduction. If the Income Tax Department is convinced that the entire long-term capital gain is reinvested in a new residential house, then a certificate may be issued with a direction not to deduct any withholding tax. Practically, it is not possible to obtain such nil deduction of tax at source. In that case, the buyer has to deduct withholding tax. In such case, you have to file return of income claiming capital gain exemption under section 82 and claim refund. My experience shows that refund is normally issued on complying with formalities such as filing of return and disclosing the correct facts. 

I am likely to file my tax return for assessment year 2026-27 before July 31, 2026. Certain information is yet to be received. Therefore, subsequently can I revise the return and, if so, can you explain the provision and procedure? 

Yes, you can revise the return subsequently if you discover any omission, wrong statement or error therein. There are provisions for filing a revised return as well as an updated return. Under the present Act, an assessee can now furnish a revised return within 12 months from the end of the relevant previous year or on or before completion of the assessment, whichever is earlier. For example, for the assessment year 2026-27, 12 months end on March 31, 2027. As such, the original return filed by you on July 31, 2026, can be revised up to March 31, 2027. The relevant section is 139(5) of the I T Act 1961. Further, if you file the revised return on or before December 31, 2026, then no additional fees will be levied, but if you file the revised return between January 2027 and December 31, 2027, you are required to pay additional fees under section 234I. The additional fees are ₹1,000 where the total income does not exceed ₹5 lakh and ₹5,000 in any other case. 

Further, if you discover certain omission in the revised return, say filed on March 31, 2027, then you can still rectify the mistake by filing an updated return under section 139(8A) of the I T Act. However, the updated return under section 139(8A), which attracts additional tax varying between 25 per cent and 70 per cent, depends on the time of filing the return within four years. Thus, there are enough provisions in the Act to rectify the mistake, if any, in filing the original return of income. However, in certain cases such as search and seizure, surveys, etc., an assessee is not eligible to file an updated return. 

We would be happy to address your tax-related queries. Kindly share them with us at editorial@dsij.in

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