Tax on Capital Gain: Even if your annual income is less than Rs 12 lakh, but any part of the income has come from short term capital gain or long term capital gain, then you will have to pay tax on it.
No Rebate On Special Rate Income: In the Union Budget, Finance Minister Nirmala Sitharaman has announced to make annual income up to 12 lakhs completely tax free in the new tax regime. Such discussions are going on everywhere. If you have also really believed this, then you may be deceived. Because Section 87A of Income Tax, under which income of 12 lakhs has been made tax free, does not apply to special rate income. Income from lottery or equity comes under special rate income. Apart from this, short term capital gain and long term capital gain also come under this. Therefore, even if your annual income is less than 12 lakhs, but any part of the income has come from short term capital gain or long term capital gain, then you will have to pay tax on it.
Understand the whole math in this way
Suppose your annual income is Rs 8 lakh. If you earn Rs 3.5 lakh from lottery that year, then your income tax will not be zero. You have to pay tax at the rate of 10 percent on the income of three and a half lakhs. That means you will have to pay Rs 35 thousand to the Income Tax Department. Similarly, you will have to pay tax on the rest of the short term and long term capital gains even if the income is less than 12 lakhs. The tax calculation of short term and long term capital gains is done under section 111A and section 112 respectively. The provisions of section 87A do not apply to them.
Understand the rebate of 87-A given in the budget in this way
It is important to understand the technical aspect of income up to 12 lakhs being tax free in the new tax regime. Under section 87-A of the Income Tax Act, tax on income up to four lakhs is zero. 5% tax is to be levied on the income slab of four to eight lakhs, which will be up to Rs 20,000. Similarly, the total tax on the income slab of 8 to 12 lakhs can be up to 60 thousand at the rate of 10%. This time in the budget, rebate has been given on tax up to 60 thousand under 87-A. In this way, income up to 12 lakhs has become tax free, but this tax rebate will not be available on short term capital gain or long term capital gain under 87-A. In these cases, tax will have to be paid even on income less than 12 lakhs. Even in those incomes on which rebate will be available under 87A, after filing ITR to claim the rebate, the rebate money will come to the bank account of the return filer.
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