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Income Tax Calculator: The CBDT has released the key highlights of the Finance Bill, 2025, explaining that the capital gains will excluded from calculating the Section 87A rebate.
Income Tax Calculator.
Income Tax Calculator: Finance Minister Nirmala Sitharaman in her Budget Speech 2025 announced that there will be no income tax payable on annual income up to Rs 12 lakh “other than special rate income such as capital gains”. It caused confusion among the taxpayers as to how capital gains will affect their taxability. Let’s say, if Rs 1 lakh in the Rs 13 lakh annual salary is capital gains, will it make them eligible for the Rs 12 lakh tax rebate? Now, the CBDT has released the ‘key highlights of the Finance Bill, 2025’, explaining that the capital gains will excluded from calculating the Section 87A rebate.
According to the CBDT document, which is available on its website, “It is proposed that where resident individuals opt for the new tax regime of Section 115BAC, the incomes chargeable to tax at special rates (for example, capital gains taxable under Section 111A, Section 112, etc.) shall be excluded from calculating the Section 87A rebate.”
It means that for example, you earn Rs 13 lakh in a year, including Rs 1 lakh from capital gains, this Rs 1 lakh will be excluded from the Rs 13 lakh and you will become eligible for the income tax rebate under 87A as it comes within the Rs 12 limit.
Importantly, the tax rebate on the Rs 12 lakh annual income is available only under the new tax regime. And, this Rs 12 lakh limit increases to Rs 12.75 lakh after adjusting a standard deduction of Rs 75,000.
Finance Minister Nirmala Sitharaman during her Budget 2025 announced, “There will be no income tax payable up to income of Rs 12 lakh (i.e. average income of Rs 1 lakh per month other than special rate income such as capital gains) under the new regime. This limit will be Rs 12.75 lakh for salaried taxpayers, due to a standard deduction of Rs 75,000.”
What are Capital Gains and How are They Taxed in India?
Capital gains arise when you sell your investment and gains profit on it. For example, you had bought a company’s shares for Rs 1 lakh and now sell it at Rs 1.20 lakh, this gives you a profit or capital gain of Rs 20,000.
The capital gains are of two types based on tenure — short-term capital gains (STCG) and long term capital gains (LTCG) — and they attract different tax rates.
For unlisted shares, the holding period is 24 months to qualify as long-term assets. For listed shares, it is 12 months. Below these limits, the gains are considered STCG.
Short-term capital gains (STCG) apply when equity shares or equity mutual fund units are sold within 12 months of purchase. Previously taxed at 15 per cent, the Budget 2024 had increased the STCG tax rate to 20 per cent.
Further, long-term capital gains (LTCG) taxation applies when equity assets are held for more than 12 months. The LTCG tax rate is 12.5 per cent after the Union Budget 2024, increased from 10 per cent earlier.
Importantly, there is an exemption limit of Rs 1.25 lakh on LTCG, meaning long-term capital gains up to this amount are not taxed.
Income Tax Slabs for FY26
Under the new regime, the income tax slabs announced in the latest Union Budget 2025-26 are:
– Income up to Rs 4,00,000: Nil
– Income from Rs 4,00,001 to Rs 8,00,000: 5%
– Income from Rs 8,00,001 to Rs 12,00,000: 10%
– Income from Rs 12,00,001 to Rs 16,00,000: 15%
– Income from Rs 16,00,001 to Rs 20,00,000: 20%
– Income from Rs 20,00,000 to Rs 24,00,000: 25%
– Income above Rs 24,00,000: 30%.
