Zero tax limit of Rs. 12 lakhs and Capital Gain (STCG)

[Govindan]

I have the following sources of income:
• Pension income of ₹10,00,000
• Interest income of ₹1,50,000
• Short-term capital gains (STCG) of ₹2,00,000

What would be my income tax liability under the new tax regime?

[Diti_Savalia]

Hello @Govindan,

Welcome to the community!

Your total income (pension + interest) comes to ₹11.5 lakh, which is within the ₹12 lakh rebate limit under the new tax regime. So, no tax is payable on this portion due to the full Section 87A rebate.

However, the rebate does not apply to short-term capital gains taxed at special rates. Therefore, STCG of ₹2,00,000 will be taxed at 20%, plus 4% cess.

Here’s the tax calculation:

₹2,00,000 × 20% = ₹40,000
Cess @ 4% = ₹1,600

So, your total tax payable is ₹41,600.

Hope this helps!

[cat_exotica]

Under the new tax regime, income up to ₹12 lakh gets full Section 87A rebate, but short-term capital gains (STCG) are taxed separately at 20% plus cess, so tax of ₹41,600 on ₹2 lakh STCG.

[sandeepsood100]

But what about LTCG?

If in this case individual also has long term capital gains from selling equity mutual funds or shares,then is it covered under 12 lakhs exemption.

[Diti_Savalia]

No, LTCG is not covered under Section 87A rebate.

[S_Gupta]

If we modify the original question to the below inputs, what will be the tax liability?

• Pension income of ₹10,00,000
• Interest income of ₹1,50,000
• Short-term capital gains (STCG) on Equity u/s 111A of ₹40,000 (20% tax rate)
• Long-term capital gains (LTCG) on Equity u/s 112A of ₹15,000

For checking 87A applicability, what will be the income in the above case: ₹11,50,000 or ₹11,65,000?
@Diti_Savalia

Can total income for marginal relief calculation and 87A calculation be different?
Is marginal relief calculated by including incomes on which tax is calculated at special rates?
Net Total Income under All heads (for marginal relief calculation): Rs. ₹12,05,000?
What will be the tax liability in this case? @Sakshi_Jain
₹8,000 + 4% cess OR
₹5,000 + 4% cess?

Marginal relief under new regime: How much tax will you pay on ₹12 lakh vs ₹12.1 lakh?

By now, you might have heard that income up to ₹12 lakh is tax-free after the latest announcement in Union Budget 2025. But if you look at the new tax slabs, you’ll notice that tax rates are applicable even for income below ₹12 lakh. Why so? [New slab rates under budget 2025] See, the tax on income up to ₹12L is not zero technically. It will be calculated as per the slabs which comes at ₹60,000. But the government says we don’t want to burden individuals with tax if their income falls under …

So, if a person’s salary is 11,50,000. Should LTCG of Rs. 1,25,000 in equity be booked by this person or should it be left to keep margin of safety if the income tax portal this year also disallows 87A applicability citing some reasons or performs its own calculations for marginal relief?

[Priyanshu_Agarwal]

Hello @S_Gupta

For checking Section 87A applicability income of Rs. 1150000 will be considered because rebate is available only against normal rate income and not special rates income.

Marginal relief is calculated by excluding special rates incomes.

Hence, the tax liability in this case will be Rs.8000 + 4% Cess i.e., 8320.

Hope this helps !!

[S_Gupta]

If we modify the question further to below inputs, what will be the tax liability? ₹0 @Priyanshu_Agarwal

• Pension income of ₹10,00,000

• Interest income of ₹1,50,000

• Long-term capital gains (LTCG) on Equity u/s 112A of ₹1,25,000

Thanks. Your reply was very helpful.

[Priyanshu_Agarwal]

Hello @S_Gupta

Yes, in this case the tax liability will be zero.