Differential Tax Rates

An assessee a senior citizen, has pension income of approx. Rs. 1.80 lacs. He also has LTCG & STCG totalling about 7 lacs. LTCG being 3 lacs & STCG is the balance of Rs. 4 lacs. In this case the unutilized gap of 5% tax up to income of Rs. 5 lacs is Rs 3.20 lacs (5-1.80). In this case the LTCG would be taxed @ 10% after considering initial exemption of Rs. 1 lacs & STCG would be taxed at 15%. Due to non-availability of income taxable at normal rates, can the gap of Rs. 3.20 lacs be first used to calculate STCG tax @ 5%, instead of 15%, and avail the benefit of gap, with lower tax rate, & balance STCG @ 15%. LTCG would continue to be taxed at 10%.

Thanks in advance for the reply.

Replies (2)
Quick Summary
This discussion explores how a senior citizen with pension income and significant capital gains (LTCG & STCG) can best utilise the unutilised basic exemption slab. The core question is whether the lower 5% tax rate can be applied to Short-Term Capital Gains (STCG) before the standard 15% rate, to maximise tax savings. The conversation also touches upon the specific provisions allowing this and the process for rectifying tax returns if the system doesn't automatically apply the optimal rates.

Ofcourse you can do this and it is allowed too.

Thanks for your reply. Under which provision of Income Tax, whether Act/Rules/Notifiication/Circular is this allowed? In the return for the ensuing financial yer (20-21), the tax gets calculated automatically. Should we walt for intimation u/s 143(1) & then file rectification application u/s 154. Please advise.

Thanks once again.

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