Quick Summary
Finance Minister Nirmala Sitharaman's Budget 2025 announcement regarding income tax rebates has created confusion among taxpayers, particularly about the inclusion of capital gains in the Rs 12 lakh exemption. The Central Board of Direct Taxes (CBDT) has now issued a clarification, stating that income taxed at special rates such as capital gains will be excluded when determining eligibility for the rebate under Section 87A. What Does the CBDT Clarification Mean? According to the 'Key Highlig
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FAQ :
No, the CBDT has clarified that income taxed at special rates, such as capital gains, will be excluded when calculating eligibility for the Rs 12 lakh rebate under Section 87A.
The rebate is available to resident individuals opting for the new tax regime (Section 115BAC) with an annual income up to Rs 12 lakh, excluding capital gains.
For salaried taxpayers, the Rs 75,000 standard deduction can be claimed, making the effective income for rebate purposes up to Rs 12.75 lakh.
Capital gains arise when an asset is sold for more than its purchase price. Short-Term Capital Gains (STCG) are from assets held for less than 12 months, and Long-Term Capital Gains (LTCG) are from assets held for over 12 months.
In Budget 2024, STCG tax was increased to 20%, and LTCG tax was raised to 12.5%. However, LTCG up to Rs 1.25 lakh remains tax-exempt.
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