In the Union Budget 2025, FM announced significant changes to the income tax structure and increased the rebate threshold under section 87A from ₹7 lakh to ₹12 lakh.
However, this rebate doesn’t apply to capital gains. If you’re making money from selling stocks, mutual funds, or even property, you’ll still have to pay tax on those profits.
This is because these are special-rate incomes i.e. they are taxed at a fixed rate and not as per income slabs.
Here’s a table to summarise rebate availability on various incomes.
Now, as the rebate is only available on incomes taxed at normal slab rates, you’ll get a rebate on this if such income is within the ₹12L threshold.
However, you’ll have to pay tax on special rate incomes.
In case short-term capital gains from an investment are taxable at slab rate (like in case of real estate & gold), you will get the benefit of tax rebate on those gains.
In your case, the ₹7L salary will be tax-free due to the rebate, but capital gains will be taxable based on whether they are LTCG or STCG.
If we take a couple of more examples like these,
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₹11L as salary and other normal rate income + ₹3L capital gains:
Despite the total income being more than ₹12L, you get a full rebate on salary and capital gains will be taxable.
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₹7L as salary and other normal rate income + ₹3L capital gains:
Even if total income is less than ₹12L, you get a rebate only on salary and capital gains will be taxable.
This rebate applicability sparked a lot of confusion last year and finally got a much-needed clarification in the recent budget.