Latest news with #LTCG
Mint
2 days ago
- Business
- Mint
Income Tax Bill 2025: No change in tax rates, focus on simplifying language. Here's what IT dept says
The income tax department clarified that the new Income Tax Bill, 2025, does not propose any changes to tax rates, including long-term capital gains. The bill focuses on simplifying language and eliminating outdated provisions. In a post on the social media platform X, the Income Tax Department informed, 'There are news articles circulating on various media platforms that the new Income Tax Bill, 2025 proposes to change tax rates on LTCG for certain categories of taxpayers. It is clarified that the Income Tax Bill, 2025 aims at language simplification and removal of redundant/obsolete provisions.' The department added, 'It does not seek to change any rates of taxes. Any ambiguity in this respect shall be duly addressed during the passing of the Bill.' The new Income Tax Bill of 2025 was presented in Parliament in February and subsequently forwarded to a parliamentary committee. The committee submitted its recommendations regarding the bill to Parliament on July 21. The proposed Income Tax bill aims to enhance ease of doing business, lessen individual taxpayers' litigation burdens, and boost confidence for both small and large investors to Make in India and create jobs, member of select committee of Parliament Milind Deora said on Friday. 'This bill has seen several amendments. The government's objective, which is the right idea, is that this bill which is over 60 years old and has so many amendments to do away with that bill and replace it with a new, fresh bill is a new idea," Deora said. "I think that step on its own and intent will leader of reduced harassment, improve ease of doing business and will give investments to Make in India, invest in India and to create jobs," he added. Deora highlighted that the 60-year-old IT Bill contains many outdated provisions which have been previously amended. He stated that this bill will benefit both MSMEs and larger foreign companies, while also easing the burden on individual taxpayers. The proposed income tax bill contains 23 chapters and 536 provisions, a significant reduction from the previous 47 chapters and 819 provisions in the 1961 bill. (With inputs from agencies.)
Economic Times
2 days ago
- Business
- Economic Times
NRI Taxation: Mutual funds capital gain, TDS rules; STCG, LTCG tax rules from equity, debt, international, hybrid MFs and others
ET Online In FY 2024-25 (AY 2025-26), there were changes in the capital gain tax regime affecting almost all asset classes. The new capital gains rule will impact the non-residents who have invested in Indian mutual funds. NRIs filing ITR for the FY 2024-25 (AY 2025-26) need to be careful about the date of sale/redemption. This is important because for FY 2024-25, both the old and new capital gains rules will apply, depending on the date of sale/transfer. ET Wealth Online spoke to Naveen Wadhwa, Vice President of Research and Advisory at to get his views on these taxation rules. The following article will discuss the taxation rules for mutual fund gains that apply to NRIs, as well as the tax deducted at source (TDS) that would have been deducted from their gains in FY 2024-25 (AY 2025-26). Also read | Latest capital gain tax rules for equity mutual funds, debt mutual funds, international mutual funds TDS rules on mutual fund redemptions for NRI investors When an NRI investor withdraws money from any mutual fund scheme, tax is deducted from the amount they redeem. The net proceeds (which is the gross redemption amount minus TDS) are then credited to the NRI's bank account. The TDS is submitted to the government against the NRI's PAN. Naveen Wadhwa says: "TDS on mutual fund redemption is applicable for NRI investors only. No tax is deducted on mutual fund redemptions made by resident individuals. The TDS rate will depend on the category of mutual funds from which the money is withdrawn." Also Read | Capital gains tax rules for house property, listed equity, unlisted shares, others TDS on equity mutual fund investments of NRI An NRI investing in equity mutual funds in India will have to pay TDS on redemption. According to Wadhwa, "For FY 2024-25, TDS on equity mutual fund redemption deducted will depend on the date of sale. If the redemption happened on or before July 22, 2024, TDS on STCG will be deducted at 15% and LTCG at 10%. On the other hand, if the redemption happened on or after July 23, 2024, TDS on STCG will be deducted at 20% and LTCG at 12.5%. The TDS on LTCG will occur only if the long-term capital gains exceed Rs 1.25 lakh in a financial year." Also read | Is LTCG exemption on equity, equity mutual funds Rs 1 lakh or Rs 1.25 lakh while filing ITR for FY 2024-25 (AY 2025-26)?For the current FY 2025-26, TDS on equity mutual fund redemption will be deducted at the rate of 20% for STCG and 12.5% for LTCG, provided long-term capital gains exceed Rs 1.25 lakh in the financial year. TDS on non-equity mutual fund investments of NRI Non-equity mutual fund investments include debt mutual funds, hybrid mutual funds, international mutual funds, and so says, "For FY 2024-25, TDS on redemption from non-equity mutual will be deducted at 30%. This will apply to debt mutual fund, hybrid mutual funds and others. However, for the current FY 2025-26, the TDS rules will be different. This will happen due to a change in the definition of specified mutual funds. As per the TDS rules applicable from April 1, 2025, TDS will be deducted at 30% for redemptions made from debt mutual funds. For redemptions done from international mutual funds, hybrid funds and others, TDS will be deducted at 12.5% for LTCG and at 30% for STCG. However, if the redemption is done on or before July 22, 2025, TDS will be deducted at 20% for LTCG and at 30% for STCG." TDS on mutual fund redemptions for NRI investors Type of Fund Redemption Date Type of Gain TDS Rate Equity Mutual Fund On or before July 22, 2024 STCG 15% Equity Mutual Fund On or before July 22, 2024 LTCG (> ₹1.25 lakh) 10% Equity Mutual Fund On or after July 23, 2024 STCG 20% Equity Mutual Fund On or after July 23, 2024 LTCG (> ₹1.25 lakh) 12.50% Equity Mutual Fund From April 1, 2025 onwards STCG 20% Equity Mutual Fund From April 1, 2025 onwards LTCG (> ₹1.25 lakh) 12.50% Debt Mutual Fund From April 1, 2025 onwards All Gains 30% Hybrid/International/Other Non-Equity Funds On or before July 22, 2025 STCG 30% Hybrid/International/Other Non-Equity Funds On or before July 22, 2025 LTCG 20% Hybrid/International/Other Non-Equity Funds On or after July 23, 2025 STCG 30% Hybrid/International/Other Non-Equity Funds On or after July 23, 2025 LTCG 12.50% Tax on dividends from mutual funds received by NRIs An investor is required to choose one of the two options - Growth or Distributed income under the dividend option. If the NRI investor has chosen the dividend option, then the dividend will be credited to their bank account post TDS says, "TDS will apply to dividends received from mutual funds. Tax will be deducted at a rate of 20% on dividends. This TDS rate is the same irrespective of the type of mutual fund from which the dividend is received. NRIs should remember that every rupee earned by them in India is subject to TDS."It is important to note that dividends are taxable in the hands of an investor. Under the current rules, dividends are taxed at the income tax slabs applicable to their income. Also Read | Four ITR filing changes that NRI should know Mutual fund capital gains rules for NRI investors Here's a look at the capital gain taxation rules for equity mutual funds, debt mutual funds, hybrid mutual funds, international mutual funds, and other types of mutual funds, applicable to NRI investors. New capital gains tax rule for equity mutual funds The capital gains tax rule for equity mutual funds is the same for resident individuals and NRIs. For FY 2024-25 (AY 2025-26), the tax rate will depend on the date of sale of equity. New STCG, LTCG tax rules from July 23, 2024: For NRIs, capital gains from equity mutual funds will be considered short-term capital gains (STCG) if the mutual funds are sold on or before the completion of one year. The STCG from equity mutual funds will be taxed at 20% plus cess. These new rules will be applicable to equity mutual funds sold on or after July 23, 2024. Capital gains from equity mutual funds will be considered long-term capital gains (LTCG) if they are sold after holding them for a year. The LTCG from equity mutual funds will be taxed at 12.5% plus cess. These new rules will apply to equity mutual funds sold on or after July 23, points out that "the income tax laws allow the NRI taxpayers to claim LTCG exemption on the listed shares and equity mutual funds. For FY 2024-25, NRIs can claim LTCG exemption of Rs 1.25 lakh on the long-term capital gains arising from the sale of listed shares and equity mutual funds." Old STCG, LTCG tax rules apply till July 22, 2024: If an NRI sold equity mutual funds between April 1, 2024, and July 22, 2024, the old STCG and LTCG tax rules will apply. According to the old rules, capital gains from equity mutual funds will be considered short-term capital gains (STCG) if the mutual funds are sold on or before the completion of one year. The STCG from equity mutual funds will be taxed at 15% plus cess. Capital gains from equity mutual funds will be considered long-term capital gains (LTCG) if the mutual funds are sold after one year. The LTCG from equity mutual funds will be taxed at 10% plus cess. Wadhwa says, "Irrespective of whether LTCG is taxed under old or new rules, an NRI will be able to claim exemption of Rs 1.25 lakh from FY 2024-25 (AY 2025-26)." New STCG, LTCG tax rule for debt mutual funds There are two important dates to keep in mind when calculating capital gains from debt mutual funds - the purchase date and the sale date. Here's how an NRI can calculate capital gains from debt mutual funds for ITR filing for FY 2024-25 (AY 2025-26). Debt mutual fund sold in FY 2024-25, but investments made on or after April 1, 2023 Budget 2024 did not make any changes to the capital gains tax rules for debt mutual funds. This is because the rules for taxing capital gains from debt mutual funds were changed from April 1, 2023. According to the latest rules, gains from debt mutual funds are taxed on the basis of income tax slabs that apply to your income, regardless of the holding period. But keep in mind, this rule only applies to investments in a debt mutual fund made on or after April 1, 2023. Debt mutual fund sold in FY 2024-25, but investments made till March 31, 2023 There might be times when an NRI invested in debt mutual funds on or before March 31, 2023. In this case, the application of the capital gains rule will depend on the sale date. Debt mutual funds sold till July 22, 2024 For debt mutual fund investments made till March 31, 2023, and sold on or before July 22, 2024, the capital gains will either be termed as STCG or LTCG. Capital gains will be termed as STCG if the debt mutual funds are sold on or before the completion of 36 months (three years). STCG will be taxed at the income tax slabs applicable to your gains from debt mutual funds will be referred to as LTCG if these are sold after 36 months (three years).LTCG on these debt mutual funds will be taxed at 20% with indexation process of adjusting the purchase price to account for inflation by inflating costs is called indexation. Debt mutual funds sold on or after July 23, 2024 For investments in a debt mutual fund made till March 31, 2023, and sold on or after July 23, 2024, the capital gain rules are says, "Debt mutual funds sold on or after July 23, 2024 (if they were purchased till March 31, 2023), will have no indexation benefit. The LTCG from these debt mutual funds (sold after the completion of two years) will be taxed at 12.5% without indexation. STCG from these debt mutual funds (if sold on or before the completion of two years) will be taxed at income tax slabs." Also Read: No indexation benefit on these debt mutual funds New STCG, LTCG tax rule for hybrid mutual funds There are three types of hybrid mutual funds - conservative, balanced and aggressive. The securities held by the fund manager in the scheme's portfolio will determine the taxation of a hybrid mutual fund. Aggressive hybrid mutual funds: As per SEBI guidelines, these mutual funds should have an allocation of 65-80% to equities and between 20% and 35% to debt and other instruments, such as cash. Balanced hybrid mutual fund: As per SEBI guidelines, balanced hybrid mutual funds should have an allocation of 40% to 60% in equity and debt. No arbitrage would be permitted in this scheme. Conservative hybrid mutual funds: These funds will have an allocation of between 75% and 90% to debt instruments and between 10% and 25% to equities, as per SEBI guidelines. Wadhwa says: "For income tax purposes, aggressive mutual funds are taxed in the same fashion as normal equity mutual funds. This is because the portfolio of these schemes has a minimum equity allocation of 65% or more."If NRI has redeemed an aggressive equity mutual fund in FY 2024-25, then knowing the date of redemption is essential for determining the correct tax rate. If redeemed on or before July 22, 2024, the LTCG will be taxed at 10%. On the other hand, if redeemed on or after July 23, 2024, the LTCG will be taxed at 12.5%. The tax rate will apply if the LTCG exceeds Rs 1.25 lakh in a financial balanced and conservative equity mutual funds are considered non-equity mutual funds for income tax purposes. This is because the equity holdings in these schemes are below 65%. Wadhwa says, "Capital gains from balanced and conservative mutual funds will be taxed at income tax slabs, irrespective of holding period. However, this rule will apply to the mutual fund investments made on or after April 1, 2023. For investments made on or before March 31, 2023, the taxation rule will depend on the date of sale. This is similar to debt mutual fund taxation as mentioned above." Capital gain rules for gold mutual funds The capital gains rules for gold mutual funds are the same as those for debt mutual funds. It's worth mentioning that gold mutual funds in India typically invest in gold ETFs (Exchange-Traded Funds).Wadhwa says: "In case of gold mutual funds, the capital gains taxation rules depend on the date of purchase and redemption. LTCG from Gold mutual fund investments made on or before March 31, 2023, and redeemed on or before March 31, 2025, will be taxed at 20% without indexation and STCG at the applicable tax rate. However, for gold mutual fund investments made on or after April 1, 2023, and redeemed on or before March 31, 2025, the capital gains will be taxed according to the income tax slabs. This is applicable for FY 2024-25 (AY 2025-26)." Capital gain rules from international mutual funds International mutual funds invest in the equities of foreign companies listed on foreign stock exchanges. Wadhwa says, "The equity taxation rules will not apply to international mutual funds. This is because international mutual funds invest in equities that are not listed on the Indian stock exchanges. Hence, capital gains from international mutual funds will be subject to the same rules as those from gold mutual funds. An NRI investor must be aware of the dates of investment and sale to determine the correct rules and tax rates for capital gains taxation. This is applicable for FY 2024-25 (AY 2025-26)." Mutual fund capital gains tax rules for NRI Mutual Fund Type Condition STCG Tax Rate LTCG Tax Rate Equity Mutual Fund Sold on or before July 22, 2024 15% + cess 10% + cess (Exemption: ₹1.25 lakh) Equity Mutual Fund Sold on or after July 23, 2024 20% + cess 12.5% + cess (Exemption: ₹1.25 lakh) Debt Mutual Fund Investment made on or after Apr 1, 2023 Slab rate Slab rate Debt Mutual Fund Investment till Mar 31, 2023; Sold on or before Jul 22 Slab rate (≤ 36 months) 20% with indexation (> 36 months) Debt Mutual Fund Investment till Mar 31, 2023; Sold on or after Jul 23 Slab rate (≤ 2 years) 12.5% without indexation (> 2 years) Aggressive Hybrid Fund Equity ≥ 65% Same as Equity MF Same as Equity MF Balanced/Conservative Hybrid Fund Investment on or after Apr 1, 2023 Slab rate Slab rate Balanced/Conservative Hybrid Fund Investment on or before Mar 31, 2023 Same as Debt MF Same as Debt MF Gold Mutual Fund Invested ≤ Mar 31, 2023; Redeemed ≤ Mar 31, 2025 Slab rate 20% without indexation Gold Mutual Fund Invested ≥ Apr 1, 2023; Redeemed ≤ Mar 31, 2025 Slab rate Slab rate International Mutual Fund Same as Gold Mutual Fund Same as Gold MF Same as Gold MF Fund of Funds (FoF) ≥65% in equity/equity ETF Same as Equity MF Same as Equity MF Fund of Funds (FoF) <65% in equity Based on purchase/sale date Based on purchase/sale date ETFs Sold on or before July 22, 2024 15% 10% ETFs Sold on or after July 23, 2024 20% 12.50% Specified MF (from Apr 1, 2025) Investment after Apr 1, 2025; Debt <65% Slab rate 12.5% (after 2 years) Specified MF (from Apr 1, 2025) Investment between Apr 1, 2023 – Mar 31, 2025 Slab rate Slab rate Specified MF (from Apr 1, 2025) Investment till Mar 31, 2023 Slab rate (≤2 years) 12.5% without indexation (>2 years) Capital gain rules from Fund of Funds (FoF) mutual funds According to SEBI, "A Fund of Funds (FoF) invests in other funds. Investment in these funds helps investors spread their risks across various markets and asset classes while benefiting from professional fund management. A Fund of Funds is essentially a "fund made up of funds." It pools money from investors and invests it in a collection of other mutual funds, or exchange-traded funds (ETFs). By doing so, it provides a diversified investment portfolio managed by experts."Wadhwa says, "For NRIs, the taxation of FoF mutual funds is the same as hybrid mutual funds. This means that if FoF mutual funds allocate a minimum of 65% of the scheme's money in equity mutual funds or equity ETFs, then such FoF mutual fund will be taxed as an equity mutual fund. On the other hand, if the FoF mutual fund invests a minimum of 65% of the scheme in debt or any other instruments, then capital gains taxation will depend on the date of sale and purchase. This is applicable for FY 2024-25 (AY 2025-26)." An NRI can invest in Exchange Traded Funds (ETFs) through their demat accounts. Investments in ETFs are made via stock exchanges, as they are listed on them. There are various types of ETFs, including those for stocks, debt, gold, and more. The new capital gains rules, announced on July 23, 2024, have simplified the asset class, as listed and unlisted securities, as well as non-financial assets. Based on the asset class, the holding period is determined. Under the new rules, capital gains from listed securities are classified as long-term capital gains (LTCG) if the securities are sold after one year has passed. Otherwise, the gains are short-term capital gains. Capital gains from unlisted securities and non-financial assets are classified as long-term capital gains (LTCG) if the asset is sold after two years from the date of purchase. Otherwise, the gains are short-term capital to Wadhwa, "As ETFs are listed on the stock exchanges, it will follow the rules of listed equity and equity mutual funds for capital gains taxation. This means that ETFs sold on or after July 23, 2024, will be taxed at 12.5%, provided gains are classified as LTCG. STCG will be taxed at 20%. Similarly, ETF units will be taxed at 10% for LTCG and 15% for STCG if sold on or before July 22, 2024. NRI investor will not get the benefit of forex fluctuations as well." Capital gains rule will change for these mutual fund investments from April 1, 2025 The new definition of debt mutual funds in the Income Tax Act came into effect from April 1, 2025. According to the new definition, a debt mutual fund will invest more than 65% of its total proceeds in debt and money market instruments or a fund-of-funds with the underlying having a similar debt investment mix. Earlier, the specified debt mutual fund was defined as a mutual fund where not more than 35% of its total proceeds are invested in the equity shares of domestic companies. Due to this change of definition, taxation of specific mutual fund investments made on or after April 1, 2025, has been impacted. These specific mutual funds are - International mutual funds, Gold mutual funds, Balanced hybrid funds, and fund of funds (where the debt portion is less than 65%).Wadhwa says, "Investments made on or after April 1, 2025, in the specified mutual fund schemes where the debt instruments are less than 65% will have different taxation rules. Under the new rule, gains will be termed LTCG if the mutual fund units are sold on or after the completion of two years. LTCG will be taxed at 12.5%. On the other hand, STCG of these mutual fund units will be taxed at the income tax slabs. For investments made in these mutual fund schemes between April 1, 2023, and March 31, 2025, the gains will be taxed at the income tax slabs, irrespective of the holding period. If investments made in these schemes on or before March 31, 2023, are held, then capital gains mutual fund units sold after the completion of two years will be classified as LTCG. This LTCG will be taxed at 12.5% without the indexation benefit. Else, gains will be termed as STCG and taxed at income tax slabs." N.R. 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Time of India
5 days ago
- Business
- Time of India
Return filing season likely to be longer due to structural changes in capital gains tax
Pune: Tax experts and chartered accountants are expecting a prolonged tax season for the fiscal year 2024-25 (Assessment year 2025-26) because of several structural and technical modifications to the short-term and long-term capital tax. Many income tax return forms were uploaded late and hence it is likely to extend the filing process for chartered accountants and taxpayers. The income tax department has extended the deadline for filing returns to Sept 15 from July 31 for FY 2024-25 to account for the complexity. You Can Also Check: Pune AQI | Weather in Pune | Bank Holidays in Pune | Public Holidays in Pune "The return filing may extend till the festive season, followed by the GST filing deadline of Dec 31. This is expected to be a busy tax season," said Sukrut Deo, a chartered accountant. Tax experts said the calculation of short-term capital gains tax (STCG) and long-term capital gains (LTCG) tax is impacted after structural changes that came into effect on July 23, 2024. As per the new rules, the rate of STCG incurred before July 23, 2024, would be 15%, while investments redeemed after the date would attract a tax rate of 20%. Similarly, LTCG on mutual fund and stock investments before July 23, 2024, would be 10%, while after the date, it would be 12.5%. Long-term gains on property will now be taxed at 12.5% without indexation or at 20% with indexation benefits, depending on the option chosen by the taxpayer. The benefit of indexation, which was previously included in long-term capital gains tax computation, will no longer be available for gains arising after July 23, 2024. The forms now demand that capital gains be split into two periods, before and after July 23, 2024, with different tax calculations and reporting formats, said Saee Sumant, chartered accountant and assistant professor at MIT-WPU. Over the past three to four years, the work of tax professionals has increased significantly, as major taxpayers are investing in mutual funds and stocks. It is an extremely time-consuming process with the amount of filing involved with LTCG and STCG to be done, said Pravesh Advani, a chartered accountant. To assist taxpayers in accurately filing their taxes, the department has released revised tools and validation guidelines. In order to detect 'Category-D' faults, which could result in disallowances, and 'Category-A' defects, which prohibit return upload, these new validation rules are essential, a tax consultant said. The department uploaded the form 'ITR-2' earlier this week, significantly late than usual upload period of May. In addition, 'ITR-3' was also not uploaded properly, experts said. Form 'ITR-1' is for salaried individuals with earnings within Rs 50 lakh, 'ITR-2' for capital gains, 'ITR-3' for business income, 'ITR-4' for small business and professions, 'ITR-5' and 'ITR-6' for companies, and 'ITR-7' is for charitable trusts. For the last fiscal year, i.e. 2023-24 (AY 2024-25), 7.28 crore returns were filed. Of these, 45.77% are 'ITR-1' (3.34 crore), 14.93% are 'ITR-2' (1.09 crore), 12.50% are 'ITR-3' (91.10 lakh), 25.77% are 'ITR-4' (1.88 crore), and 1.03% are 'ITR-5' to 'ITR-7' (7.48 lakh), as per govt data released earlier.
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Business Standard
23-07-2025
- Business
- Business Standard
Planning to redeem MFs? AY 2025-26 tax rules may hit your returns
A slew of tax changes, effective from July 23, 2024, has altered how your mutual fund gains will be taxed in Assessment Year (AY) 2025–26. From higher long-term capital gains (LTCG) taxes on equity mutual funds to the removal of indexation benefits on older debt funds, investors now need to rethink their strategies. Experts say the timing of redemptions and choice of funds could have a noticeable impact on post-tax returns. Redeeming before or after July 23: Why timing matters Col Sanjeev Govila (retd), certified financial planner and chief executive officer of Hum Fauji Initiatives, a financial advisory firm, says that hesitation could cost investors more in taxes. - Equity MFs: Suppose Rohan invested Rs 10 lakh in July 2021 and sells for Rs 16 lakh. - Before July 23: LTCG tax is 10 per cent after Rs 1.25 lakh exemption, resulting in Rs 47,500 tax. -After July 23: Tax rate rises to 12.5 per cent, increasing tax to Rs 59,375. - Debt MFs (bought before April 1, 2023): Priya invested Rs 10 lakh, now worth Rs 16 lakh. -Before July 23: Indexation reduces taxable gain to Rs 3 lakh; tax = Rs 60,000. - After July 23: No indexation; full Rs 6 lakh taxed at 12.5 per cent, i.e., Rs 75,000. 'The loss of indexation means debt funds are now less nuanced and more expensive tax-wise,' Govila explains. SIPs now have split tax personalities Each SIP instalment is treated separately, and taxation depends on its purchase date. Govila says: -SIPs before April 1, 2023: Debt fund units held >2 years taxed at 12.5 per cent LTCG. -SIPs after April 1, 2023: Entirely taxed at slab rate, irrespective of holding period. For example, Arun, investing Rs 5,000/month since 2022, will find his older debt SIPs taxed favourably compared to those started later. A new six-way tax split Vivek Jalan, partner, Tax Connect Advisory Services LLP, suggests splitting SIP investments into six categories for clarity: - Bought on/before Mar 31, 2023; sold before July 23, 2024; held <36 months – STCG, taxed at slab rate - Bought on/before Mar 31, 2023; sold before July 23, 2024; held >36 months – LTCG, 20% with indexation - Bought on/after Apr 1, 2023; sold before July 23, 2024 – Taxed at slab rate - Bought on/before Mar 31, 2023; sold after July 23, 2024; held <2 years – STCG, taxed at slab rate - Bought on/before Mar 31, 2023; sold after July 23, 2024; held >2 years – LTCG, 12.5% without indexation - Bought on/after Apr 1, 2023; sold after July 23, 2024 – Taxed at slab rate 'Debt mutual funds sold after July 23, 2024, will no longer enjoy indexation. This flat LTCG of 12.5 per cent could hurt long-term investors,' Jalan says. Gold and international funds: Strategic, not tax-smart Chintak Shah, vice president, Anand Rathi Wealth Ltd., points out that gold and international funds have also lost their earlier edge. 'These funds were taxed at 20 per cent with indexation if held for over three years. Now, they're considered long-term after two years but taxed flat at 12.5 per cent, with no indexation,' Shah explains. Whether this is good or bad depends on returns. 'If such funds deliver over 9.5 per cent annual returns, the new regime is more favourable. Otherwise, the old system would have been better,' Shah adds.
Time of India
23-07-2025
- Business
- Time of India
Taxable income below Rs 7 lakh: Will you pay zero income tax if this income includes LTCG and STCG for FY 2024-25?
Tax experts' view on tax rebate availability under Section 87A on LTCG, STCG Academy Empower your mind, elevate your skills NTR (No rebate u/s 87A on Capital gains, Adjustment against Basic exemption available) OTR (Rebate u/s 87A on Capital gains available except Covered U/s112a, Adjustment against Basic exemption also available) 1. No tax payable if the total taxable income(excluding any Capital gains) is upto 7 lakhs. Rebate u/s 87A is only available on income other than capital gains 1. No tax payable if the total taxable income(including any Capital gains) is upto 5 lakhs. Rebate is also available for STCG & LTCG(except Covered U/s112a) 2. On any capital gains. The tax is payable at applicable rates even if the taxable income is below 7 lakhs. NO rebate available 2. The taxable income should be below 5lakhs without giving the benefit of exemption of 1.25 under LTCG. Refer case 9 & 10 3. The adjustment of Capital gain is only available if the taxable income is below exemption limit i.e 3lakhs in NTR for FY 2024-25 3. The adjustment of Capital gain is available even if the taxable income is above basic exemption limit i.e 2.5 lakhs in OTR for FY 2024-25, but below 5lakhs 3. The chronology of adjustment against basic exemption will be STCG first & followed up by LTCG 4. The chronology of adjustment against basic exemption will be STCG first & followed up by LTCG New Tax Regime STCG LTCG u/s 112A LTCG Rebate u/s 87A No No No Adjustment against Basic exemption Yes Yes Yes Old Tax Regime STCG LTCG u/s 112A LTCG Rebate u/s 87A Yes No Yes Adjustment against Basic exemption Yes Yes Yes What if your total taxable income (excluding LTCG and STCG) is below the basic exemption limit? The income tax laws applicable for FY 2024-25 allow zero tax payable under the new tax regime if your net taxable income is under Rs 7 lakh. Just a heads up, last year, when you filed your ITR, the Income Tax Department did not allow tax rebates on special incomes such as short-term capital gains and long-term capital gains. Plus, Budget 2025 has clarified that starting from FY2025-26, you won't be able to claim the tax rebate under Section 87A on incomes taxed at a special rate. But what about this assessment year? Can you still get a tax rebate on special incomes when you file your ITR this year for FY 2024-25 (AY 2025-26)?To understand this better, picture this: Let's say your taxable income, not counting LTCG and STCG , is Rs 4.5 lakh. For FY 2024-25 (AY 2025-26), you have LTCG of Rs 75,000 and STCG of Rs 30,000 from equity mutual funds. This brings your total taxable income to Rs 5.55 lakh for FY 2024-25. Since your total taxable income (including LTCG and STCG) is under Rs 7 lakh, can you claim a tax rebate, or do you need to pay tax on LTCG and STCG?ET Wealth Online reached out to tax experts to find out if the tax rebate under Section 87A applies to all incomes, including special incomes, when filing the ITR for FY 2024-25 (AY 2025-26).Suresh Surana, Practising Chartered Accountant, says, "If a resident individual's total taxable income for FY 2024-25 (AY 2025-26) is below the specified threshold, then they may be eligible for a full tax rebate under Section 87A, subject to conditions."Also Read | Capital gains tax ready recknor for house property, listed equity The threshold income to be eligible for 87A rebate under new tax regime for income earned in FY 2024-25 is Rs 7 lakh. This threshold under old tax regime is Rs 5 lakh. The income tax laws allow tax rebate of Rs 12,500 under the old tax regime and of Rs 25,000 under the new tax regime under Section 87A. Due to the tax rebate, there is no tax payable on net taxable incomes up to Rs 5 lakh in the old tax regime and Rs 7 lakh in the new tax regime for FY 2024-25 (AY 2025-26).But the next big question is whether this threshold income will include LTCG and STCG."Such a tax rebate cannot be claimed against LTCG and STCG on equity-oriented mutual funds and listed shares, as these are taxed at special rates under Sections 112A and 111A, respectively, under the new tax regime. Even in such cases, a taxpayer can utilise the basic exemption limit to reduce the taxable portion of capital gains," explains the selection of tax regime will play the most crucial role in determining whether you will get LTCG and STCG included in income for considering 87A tax rebate Kaushik, Co-founder & CEO, Taxspanner (a Zaggle company), says, "The ITR utilities enable tax rebates under Section 87A on all incomes, including LTCG (except those covered under Section 112A) and STCG, if the taxpayer has opted for the old tax regime for FY 2024-25. What it means that LTCG and STCG income can be included to determine threshold for 87A under old tax regime for all asset classes except for LTCG on equity and equity-oriented mutual funds. However, if the taxpayer has chosen the new tax regime for AY 2025-26, then tax rebate under Section 87A is not allowed on the incomes taxed at special rates. What it means that all LTCG and STCG income which are calculated at special rates are not eligible to be included in income for determining the threshold for 87A rebate."Abhishek Soni, CEO of Tax2Win, an ITR filing website, says, "The Income Tax Department's utility for ITR filing for FY 2024-25 does not allow the rebate under Section 87A under the new tax regime if the income is taxed at special rates. However, under the new regime, the rebate can still be claimed if capital gains are taxed at normal slab rates (STCG on property or gains on debt mutual fund purchased on or after April 1, 2023). Under the old tax regime, the rebate under Section 87A is allowed on all types of income (except long-term capital gains under Section 112A) as long as the total income does not exceed Rs. 5 lakh."Also Read | ITR-1, ITR-2 or ITR-3: Which tax return form applies to your income? Vishwas Panijar, Partner, Nangia Andersen LLP, says, "For FY 2024-25 (AY 2025-26), individuals opting for the new tax regime with total income not exceeding Rs 7 lakh are eligible for a rebate of Rs 25,000 under Section 87A. The rebate is available even in case of LTCG/STCG other than LTCG arising from listed securities taxable under Section 112A. In other words, if the long- term capital gains (LTCG) that are part of your total income do not come from selling listed stocks or equity mutual funds, you can get a tax rebate of up to Rs 25,000. Similarly, a taxpayer can claim tax rebate on STCG from equity and equity mutual funds."Akhil Chandna, Partner, Global People Solutions Leader, Grant Thornton Bharat, says, "In our view, a resident taxpayer is entitled to claim rebate on income up to Rs 7 lakh (under new tax regime) on STCG arising from equity shares and/or equity mutual funds. However, such rebate is not available for LTCG on equity shares and/or equity mutual funds."Source: TaxspannerSource: TaxspannerThe basic exemption limit under the old and new tax regimes is different for FY 2024-25 (AY 2025-26).The basic exemption limit is Rs 2.5 lakh (Rs 3 lakh for senior citizens and Rs 5 lakh for super senior citizens) under the old tax regime and Rs 3 lakh (for all individuals) in the new tax regime for FY it is important to note that STCG and LTCG from listed equity shares and equity mutual funds are taxed at special says, "If someone earns less than the basic exemption limit (i.e., Rs 3,00,000 for the new tax regime and Rs 2,50,000 for the old tax regime for FY 2024-25), then the resident taxpayer can benefit from this exemption on special-rated income. Accordingly, if a resident of India has income solely from STCG and LTCG and other income is less than Rs 7 lakh, the taxpayer should look at the relief options available, like the basic exemption limit and rebate (as applicable). In these cases, not all of the LTCG and STCG will necessarily be taxed at special rates."The income tax laws allow taxpayer to claim exemption of up to Rs 1.25 lakh in a financial year on long-term capital gains from listed shares and equity mutual funds. This means that LTCG tax will be payable only in situations where LTCG exceeds Rs 1.25 lakh in a financial says, "The Income Tax Act allows a resident individual whose total income (excluding STCG and LTCG) is below the basic exemption limit to adjust STCG under Section 111A and LTCG under Section 112A against the unutilized portion of the basic exemption limit. This benefit is applicable regardless of whether the taxpayer opts for the old or new tax regime, provided certain conditions are met.""In either regime, if the total income (excluding STCG, LTCG, casual income) falls below the basic exemption threshold, the shortfall w.r.t. to such LTCG and STCG can be adjusted against such basic exemption limit. As such, taxpayers can adjust STCG and LTCG from equity mutual funds and shares under Sections 111A and 112A against the basic exemption if one's total income, including these gains, is below the basic exemption limit, in both the old as well as the new tax regime," Surana told to ET Wealth Online.
