New Tax Regime: Rs 60,000 Rebate Limited to Salary, Not Short-Term Capital Gains
Section 87A rebate under the new tax regime benefits individuals with total income below Rs 12 lakh, but does not apply to income taxed at special rates such as short-term capital gains.
New Delhi, Dec 01 : Under the new tax regime, individuals with total income below Rs 12 lakh can claim a higher rebate of up to Rs 60,000 under Section 87A, significantly reducing their tax liability. However, this rebate is limited to normal income and does not cover income taxed at special rates, such as short-term capital gains (STCG) from listed shares and equity mutual funds.
Experts clarify that Section 115BAC provides lower slab rates for normal income but removes several exemptions and deductions, including HRA, LTA, and those under Sections 80C, 80CCD, 80G, 80TTA, and 80TTB. While normal income qualifies for the Section 87A rebate, capital gains taxed under special rates such as STCG at 15% are excluded when calculating eligibility.
For example, if an individual earns normal income below Rs 12 lakh and also has Rs 60,000 as STCG and Rs 1 lakh as long-term capital gains (LTCG), the following applies:
Normal income: Eligible for Section 87A rebate, reducing tax on this portion to zero.
LTCG: Tax-free up to Rs 1.25 lakh under Section 112A; no tax is payable on Rs 1 lakh LTCG.
STCG: Taxable at 20% (plus cess) and cannot be offset by the Section 87A rebate.
This clarification ensures taxpayers understand that while the new regime offers substantial benefits for ordinary income, special-rate incomes like short-term capital gains are treated separately.
