My client's total income is under Rs 7 lakh but it includes a small crypto gain, and the CPC has knocked out his Rs 25,000 rebate under section 87A. Is that right?
On this decision, yes. The Surat Bench held that where the tax on VDA income is computed under s.115BBH, the case is not covered by s.115BAC and the rebate under the proviso to s.87A — which is expressed to apply where the total income is chargeable to tax under s.115BAC(1A) — is therefore not available against it. The appeal was dismissed and the disallowance of the Rs 25,000 rebate for AY 2024-25 was upheld.
Decided by the ITAT (Shri Sandeep Gosain, Judicial Member and Shri Om Prakash Kant, Accountant Member) on 2025-12-23, reported as ITA No. 873/SRT/2025 (Income Tax Appellate Tribunal, Surat); assessment year 2024-25; heard 6 October 2025, pronounced 23 December 2025. It bears on section 115BBH, section 87A, section 115BAC, section 2(47A) of the Income Tax Act 1961, in Crypto & Virtual Digital Assets and Deductions & Disallowances matters.
This is the CPC's standard adjustment on returns for AY 2024-25 onwards where a small VDA gain sits inside a total income below Rs 7 lakh, and it is the first Tribunal order located that meets it head on. It matters that the assessee's arguments were substantial and that the Bench dealt with them briefly. He argued that s.112A is the only special-rate provision carrying an express restriction on the s.87A rebate, that nothing in s.115BAC restricts the rebate, and — the strongest point — that the Finance Act 2025 inserted a SECOND proviso to s.87A with effect from 1 April 2026 capping the rebate at the tax payable at s.115BAC(1A) rates, which on ordinary principles suggests that no such cap existed for AY 2024-25. The Bench's answer was that s.115BAC and s.115BBH 'play in different areas', so a case falling under s.115BBH is not covered by s.115BAC at all. That reasoning is open to argument: s.115BAC(1A) prescribes rates on total income, and s.115BBH(1)(b) itself contemplates the balance of the total income being taxed in the ordinary way, so it is not obvious that an assessee whose total income includes VDA gains ceases to be chargeable under s.115BAC(1A). The Bench also distinguished the five orders cited for the assessee, including the Bombay High Court in Chamber of Tax Consultants v DGIT (Systems), on the ground that none concerned VDA income. A practitioner facing this adjustment should preserve the point rather than concede it, while recognising that this order is against him and that from AY 2026-27 the second proviso settles it in the department's favour.
Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere.
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The assessee, an individual, filed his return for AY 2024-25 under the regime governed by s.115BAC(1A) declaring total income of Rs 4,80,800, which included gains of Rs 2,02,993 from the transfer of virtual digital assets. He claimed the rebate of Rs 25,000 under s.87A on the footing that his total income was below Rs 7,00,000. The CPC disallowed the rebate, citing the bar on rebate where tax is computed under s.115BBH. The Additional/Joint Commissioner of Income-tax (Appeals)-2, Chennai dismissed his appeal by order dated 26 June 2025, holding that s.115BBH, introduced by the Finance Act 2022 and effective from AY 2023-24, taxes VDA income at a flat thirty per cent and allows no deduction, set-off or rebate against it except cost of acquisition, and referring to CBDT Circular No. 13/2022 dated 22 June 2022; the CIT(A) also rejected the argument that the restriction on rebate operated only from AY 2026-27. Before the Tribunal the assessee argued that only s.112A carries an express restriction on the s.87A rebate, that no sub-section of s.115BAC restricts it, and that the Finance Act 2025 amendment to s.87A confining the rebate to income chargeable under s.115BAC(1A) is effective only from AY 2026-27; he relied on Chamber of Tax Consultants v DGIT (Systems) (Bombay High Court) and four Tribunal orders. If the VDA gain were excluded, the remaining income was below the taxable limit, so the whole of the tax paid was tax on the VDA gain at thirty per cent.
The appeal was dismissed. Where the assessee's income falls under s.115BBH it is not covered by s.115BAC, and the rebate of Rs 25,000 under the proviso to s.87A — which is available where the total income is chargeable to tax under s.115BAC(1A) and does not exceed Rs 7,00,000 — is consequently not available against the tax on VDA income for AY 2024-25 (para 6).
The Bench set out s.87A as it stood for AY 2024-25 with the proviso inserted by the Finance Act 2023 with effect from 1 April 2024, the second proviso to be inserted by the Finance Act 2025 with effect from 1 April 2026 capping the deduction at the income-tax payable at the rates in s.115BAC(1A), and the whole of s.115BBH (para 6). It reasoned that the proviso to s.87A gives the Rs 25,000 rebate where the total income is chargeable under s.115BAC(1A) and does not exceed Rs 7 lakh; that here the total income of Rs 4,80,800 included Rs 2,02,993 of VDA income assessed under the head capital gains and subjected to the special rate of thirty per cent; that if the VDA income were subtracted the remainder was below the taxable limit, so the tax paid was tax on the VDA gain alone; that Chapter XII prescribes the determination of tax in certain special cases; and that the rates prescribed under s.115BAC and under s.115BBH operate in different areas, so a case falling under s.115BBH is not covered by s.115BAC and is not eligible for the rebate. The decisions relied on for the assessee were distinguished on the footing that none of them concerned income containing gain from a VDA liable to tax under s.115BBH.
The tax rate prescribed under section 115BAC and 115BBH plays in different area and therefore if assessee's case falling under section 115BBH, it is certainly not covered under section 115BAC of the Act and consequently will not be legible for the benefit of rebate of ₹ 25,000/- provided under the provision to section 87A of the Act.
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Handle my notice → Ask a CA on WhatsAppOn this decision, yes. The Surat Bench held that where the tax on VDA income is computed under s.115BBH, the case is not covered by s.115BAC and the rebate under the proviso to s.87A — which is expressed to apply where the total income is chargeable to tax under s.115BAC(1A) — is therefore not available against it. The appeal was dismissed and the disallowance of the Rs 25,000 rebate for AY 2024-25 was upheld. This was decided by the ITAT (Shri Sandeep Gosain, Judicial Member and Shri Om Prakash Kant, Accountant Member) and bears on section 115BBH, section 87A, section 115BAC, section 2(47A) of the Income Tax Act 1961. It is reported as ITA No. 873/SRT/2025 (Income Tax Appellate Tribunal, Surat); assessment year 2024-25; heard 6 October 2025, pronounced 23 December 2025. This is the CPC's standard adjustment on returns for AY 2024-25 onwards where a small VDA gain sits inside a total income below Rs 7 lakh, and it is the first Tribunal order located that meets it head on. It matters that the assessee's arguments were substantial and that the Bench dealt with them briefly. He argued that s.112A is the only special-rate provision carrying an express restriction on the s.87A rebate, that nothing in s.115BAC restricts the rebate, and — the strongest point — that the Finance Act 2025 inserted a SECOND proviso to s.87A with effect from 1 April 2026 capping the rebate at the tax payable at s.115BAC(1A) rates, which on ordinary principles suggests that no such cap existed for AY 2024-25. The Bench's answer was that s.115BAC and s.115BBH 'play in different areas', so a case falling under s.115BBH is not covered by s.115BAC at all. That reasoning is open to argument: s.115BAC(1A) prescribes rates on total income, and s.115BBH(1)(b) itself contemplates the balance of the total income being taxed in the ordinary way, so it is not obvious that an assessee whose total income includes VDA gains ceases to be chargeable under s.115BAC(1A). The Bench also distinguished the five orders cited for the assessee, including the Bombay High Court in Chamber of Tax Consultants v DGIT (Systems), on the ground that none concerned VDA income. A practitioner facing this adjustment should preserve the point rather than concede it, while recognising that this order is against him and that from AY 2026-27 the second proviso settles it in the department's favour. If it applies to you, the first step is this: Check which assessment year the adjustment relates to: for AY 2026-27 onwards the second proviso to s.87A inserted by the Finance Act 2025 caps the rebate at the tax payable at s.115BAC(1A) rates, so the point is closed; for AY 2024-25 and AY 2025-26 it is open and this order is the contrary authority.
The assessee, an individual, filed his return for AY 2024-25 under the regime governed by s.115BAC(1A) declaring total income of Rs 4,80,800, which included gains of Rs 2,02,993 from the transfer of virtual digital assets. He claimed the rebate of Rs 25,000 under s.87A on the footing that his total income was below Rs 7,00,000. The CPC disallowed the rebate, citing the bar on rebate where tax is computed under s.115BBH. The Additional/Joint Commissioner of Income-tax (Appeals)-2, Chennai dismissed his appeal by order dated 26 June 2025, holding that s.115BBH, introduced by the Finance Act 2022 and effective from AY 2023-24, taxes VDA income at a flat thirty per cent and allows no deduction, set-off or rebate against it except cost of acquisition, and referring to CBDT Circular No. 13/2022 dated 22 June 2022; the CIT(A) also rejected the argument that the restriction on rebate operated only from AY 2026-27. Before the Tribunal the assessee argued that only s.112A carries an express restriction on the s.87A rebate, that no sub-section of s.115BAC restricts it, and that the Finance Act 2025 amendment to s.87A confining the rebate to income chargeable under s.115BAC(1A) is effective only from AY 2026-27; he relied on Chamber of Tax Consultants v DGIT (Systems) (Bombay High Court) and four Tribunal orders. If the VDA gain were excluded, the remaining income was below the taxable limit, so the whole of the tax paid was tax on the VDA gain at thirty per cent. The matter was decided on 2025-12-23 by the ITAT (Shri Sandeep Gosain, Judicial Member and Shri Om Prakash Kant, Accountant Member). On those facts the ITAT held as follows. The appeal was dismissed. Where the assessee's income falls under s.115BBH it is not covered by s.115BAC, and the rebate of Rs 25,000 under the proviso to s.87A — which is available where the total income is chargeable to tax under s.115BAC(1A) and does not exceed Rs 7,00,000 — is consequently not available against the tax on VDA income for AY 2024-25 (para 6).
The Bench set out s.87A as it stood for AY 2024-25 with the proviso inserted by the Finance Act 2023 with effect from 1 April 2024, the second proviso to be inserted by the Finance Act 2025 with effect from 1 April 2026 capping the deduction at the income-tax payable at the rates in s.115BAC(1A), and the whole of s.115BBH (para 6). It reasoned that the proviso to s.87A gives the Rs 25,000 rebate where the total income is chargeable under s.115BAC(1A) and does not exceed Rs 7 lakh; that here the total income of Rs 4,80,800 included Rs 2,02,993 of VDA income assessed under the head capital gains and subjected to the special rate of thirty per cent; that if the VDA income were subtracted the remainder was below the taxable limit, so the tax paid was tax on the VDA gain alone; that Chapter XII prescribes the determination of tax in certain special cases; and that the rates prescribed under s.115BAC and under s.115BBH operate in different areas, so a case falling under s.115BBH is not covered by s.115BAC and is not eligible for the rebate. The decisions relied on for the assessee were distinguished on the footing that none of them concerned income containing gain from a VDA liable to tax under s.115BBH. In the words reproduced by the source cited on this page: "The tax rate prescribed under section 115BAC and 115BBH plays in different area and therefore if assessee's case falling under section 115BBH, it is certainly not covered under section 115BAC of the Act and consequently will not be legible for the benefit of rebate of ₹ 25,000/- provided under the provision to section 87A of the Act."
It was decided by the ITAT on 2025-12-23 and is reported as ITA No. 873/SRT/2025 (Income Tax Appellate Tribunal, Surat); assessment year 2024-25; heard 6 October 2025, pronounced 23 December 2025. Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere. A Tribunal decision binds the assessing officer and the Commissioner (Appeals) within that Tribunal's jurisdiction, and is persuasive before other benches. It is not binding on a High Court, and a contrary co-ordinate bench decision will be argued against you, so check whether the point has been taken the other way before you build a reply around it. On section 115BBH, section 87A, section 115BAC, section 2(47A), the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the department, and it appears in this library for that reason — you need to know what the Assessing Officer will cite against you. The appeal was dismissed. Where the assessee's income falls under s.115BBH it is not covered by s.115BAC, and the rebate of Rs 25,000 under the proviso to s.87A — which is available where the total income is chargeable to tax under s.115BAC(1A) and does not exceed Rs 7,00,000 — is consequently not available against the tax on VDA income for AY 2024-25 (para 6). It arises in Crypto & Virtual Digital Assets and Deductions & Disallowances matters, on section 115BBH, section 87A, section 115BAC, section 2(47A) of the Income Tax Act 1961, and was decided by Shri Sandeep Gosain, Judicial Member and Shri Om Prakash Kant, Accountant Member. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Compute what is actually at stake — where the non-VDA income is below the taxable limit, as it was here, the whole of the disputed rebate is attributable to the VDA tax and the appeal is about that alone. If you take the point, meet the Bench's reasoning directly: the argument to make is that s.115BAC(1A) charges the total income and s.115BBH(1)(b) presupposes it, so the assessee remains one whose total income is chargeable under s.115BAC(1A). Do not rely on the general s.87A rebate authorities without more; the Bench distinguished all five cited, including the Bombay High Court decision, precisely because none of them involved VDA income. Use the Finance Act 2025 second proviso as the prospective-amendment argument, and be ready for the answer that it was clarificatory. Where the client's return is still to be filed for an open year, weigh the interest and penalty exposure of claiming the rebate against the size of the rebate before claiming it.
Validity check could not be completed. Validity check could not be completed. Decided 23 December 2025. I did not locate any appeal against this order and did not search for later Tribunal or High Court decisions taking a different view on the s.87A rebate against s.115BBH income; a later pass should look for one, because the issue affects a large number of CPC adjustments for AY 2024-25 and AY 2025-26. The five decisions cited for the assessee — Chamber of Tax Consultants v DGIT (Systems) (Bombay High Court), Jayshreeben Jayantibhai Palsana v ITO (ITA No. 1014/Ahd/2025), Padmaben Kantilal Ranpara v ITO (ITA No. 516/RJT/2025), Pramod Kumar Dubey v ITO (ITA No. 314/AGR/2025) and Venkatachalam Venkatraman v ITO (ITA No. 1431/Chny/2025) — were distinguished by the Bench and were NOT read by me. Note that the point is closed prospectively by the second proviso to s.87A inserted by the Finance Act 2025 with effect from 1 April 2026. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
The order is headed 'SURAT BENCH "SMC" SURAT' but two members sat, Shri Sandeep Gosain (Judicial Member) and Shri Om Prakash Kant (Accountant Member), which is not an SMC constitution; the report is inconsistent on its face and I have recorded both. The concluding sentence of para 6 as printed reads 'Accordingly, we hold that business is not entitled for the rebate under section 87A of the Act' — the word 'business' is evidently a slip for 'the assessee', and I have not silently corrected it in the quote, which is taken from an earlier sentence of the same paragraph. The order was pronounced by display of the result on the notice board under Rule 34(4) of the ITAT Rules 1963, not in open court. The five decisions cited for the assessee are named in para 4 by case name and appeal number and were not read by me. The raw text was retrieved twice: a first fetch returned a summary rather than the order, a second fetch of the same URL returned the full raw text, and the sentence used as key_quote was then confirmed a third time through the indiankanoon docfragment endpoint, where it appears identically save for a line-break inside the word 'different'. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The appeal was dismissed. Where the assessee's income falls under s.115BBH it is not covered by s.115BAC, and the rebate of Rs 25,000 under the proviso to s.87A — which is available where the total income is chargeable to tax under s.115BAC(1A) and does not exceed Rs 7,00,000 — is consequently not available against the tax on VDA income for AY 2024-25 (para 6).
Every entry in this library links to where it was found, so you can check it yourself rather than take our word for it.
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