New Delhi. Narendra Modi government made major changes in income tax in Budget 2025 and made annual income up to Rs 12 lakh tax-free under the new tax regime. That means if someone’s total annual income is less than Rs 12 lakh, then there will be no tax liability. For this, the government gives tax rebate of up to Rs 60,000 under section 87A. This rebate is much higher than before, because in the old tax regime, rebate was available only up to Rs 12,500. But there is also a question in the minds of common people that if their income also includes capital gains i.e. profits from shares or mutual funds, will they be able to get this rebate or will they have to pay tax on capital gains?
Suppose the normal income of a person is less than Rs 12 lakh. But he got short term capital gain of Rs 60,000 from stock market trading and also got long term capital gain of Rs 1 lakh. In such a situation, the dilemma is whether the tax rebate available under Section 87A will be applicable in this situation also or not.
Expert opinion
According to a report by Moneycontrol, tax expert Balwant Jain says that in the new tax regime under Section 115BAC, individual taxpayers, HUF and Association of Persons have to pay tax at a lower rate. But there is also a condition attached to it. In the new tax regime, there is no relief under deductions like HRA, LTA, Section 80C, 80CCD, 80G, 80TTA and 80TTB.
Now comes the matter of capital gains. Jain explains that in the new regime, if the total income of a person is not more than Rs 12 lakh, then he can get tax rebate of up to Rs 60,000 under Section 87A. But this rebate is applicable only on normal income. Income like capital gains, which are taxed at special tax rates, are not included in the calculation of this rebate. That is, rebate is given after seeing what is your normal income and not what is the total income including capital gains.
tax will have to be paid
Jain says that if a person’s normal income is less than Rs 12 lakh, then the tax on this part can be completely waived off through rebate. But rebate is not applicable on special rate short term capital gains. You will have to pay tax on this as per the rate. For example, if someone has made short term capital gain of Rs 60,000, then he will have to pay tax on it at the rate of 20 percent. Cess will be added separately.
Tax on long term capital gains
According to Jain, under Section 112A, there is no tax on long term capital gains up to Rs 1.25 lakh from listed shares and equity mutual funds. Therefore, if a taxpayer has made long term capital gain of Rs 1 lakh, then he will not need to pay any tax on it. Overall, the taxpayer will have to pay tax only on his short term capital gains.
