Capital Gains Tax Trap: Why Rs. 12 Lakh Limit Doesn’t Save Investors
Even if your total income stays below Rs. 12 lakhs under the new tax regime, capital gains from investments like stocks, mutual funds, or property trigger separate tax obligations that bypass the Section 87A rebate. This applies to both short-term capital gains (STCG) and long-term capital gains (LTCG), ensuring investors pay tax on profits regardless of overall income limits.
Section 87A rebate (up to Rs. 60,000) exempts only income taxed at slab rates, excluding special-rate incomes like capital gains. STCG on equity shares or funds (held <12-24 months) faces 20% flat tax, while LTCG above Rs. 1.25 lakhs exemption incurs 12.5% on listed equities or property (post-July 2024, sans indexation). These gains add to total income but get taxed independently, with no zero-tax benefit up to Rs. 12 lakhs.
Middle-income earners in Mumbai suburbs, focused on stock trading, must segregate gains during ITR filing via Schedule CG, even if slab tax is nil. Opting for new regime simplifies slabs but exposes gains to flat rates; old regime offers no relief here either. Use e-filing calculators and plan holdings to leverage Rs. 1.25 lakhs LTCG exemption annually.