Latest news with #Section87A
Time of India
42 minutes ago
- Business
- Time of India
No income tax rebate under Section 87A even if income is less than Rs 7 Lakh under new tax regime in this situation, point out CAs
Academy Empower your mind, elevate your skills What is the issue with Section 87A tax rebate? Rs 7 lakh under the new tax regime, (Rs 25,000 is the maximum rebate), OR Rs 5 lakh under the old tax regime (Rs 12,500 is the maximum rebate). The actual tax payable (before cess), or The maximum limit specified under Section 87A.' 'For AY 2025–26, Section 87A provides a tax rebate based on the taxpayer's total income, which is the aggregate of income under all heads (after deductions). Under the old tax regime, the rebate is available if total income is up to Rs 5 lakh, with a maximum rebate of Rs 12,500. Under the new tax regime, the threshold is Rs 7 lakh, with a rebate of up to Rs 25,000.' 'However, as per Section 112A, if a taxpayer's total income includes long-term capital gains (LTCG), the rebate under Section 87A is allowed only after deducting the tax payable on such LTCGs. It's important to note that this limitation is specifically provided under Section 112A for LTCGs, and is not extended to other types of income, such as short-term capital gains (STCG) or income under any other head.' ITR utility not allowing Section 87A on special rate incomes What is the problem with Section 87A rebate for FY 2024-25? What about the old tax regime? On which incomes you can get 87A rebate for AY 2026-27 (FY 2025-26)? New regime: The rebate under the new regime has been raised to ₹60,000 for resident individuals with taxable income up to Rs 12 lakh, but incomes taxed at special rates (STCG under 111A, LTCG under 112) will not be eligible for 87A rebate. The rebate applies only to slab‑rate income up to Rs 12 lakh. Old regime: The tax rebate under the old regime will be the same as FY 2024-25, i.e., Rs 12,500, if the total taxable income (including STCG) up to Rs 5 lakh. Chartered Accountant Abhas Halakhandi, writing on X (formerly known as Twitter) has recently brought attention to a concern regarding the denial of the Section 87A tax rebate to eligible taxpayers. Section 87A rebate is applicable to tax payers with an annual income of up to Rs 7 lakh under new tax regime and Rs 5 lakh under the old tax regime. When the Section 87A tax rebate is applied, the net tax liability becomes nil. However, Halakhandi and other chartered accountants have highlighted on social media that it is not being given to eligible taxpayers if they have any special rate incomes like short term capital gains (STCG) under the new tax this context, it is important to mention that the Section 87A tax rebate is not applicable to special rate income as per the amendment introcuded in Budget 2025, which will take effect from FY 2025-26 (AY 2026-27) onwards. The concern raised by chartered accountants is that the Section 87A rebate on special rate incomes is also not being granted for FY 2024-25 (AY 2025-26).Halakhandi said on X (formerly Twitter on August 4, 2025): 'Section 87A Rebate – Restriction applied even before it became law? From FY 2025-26, 87A rebate in the new regime won't apply on special rate income (like LTCG, STCG @111A)—as per new proviso inserted by Finance Act 2025. But taxpayers are paying additional taxes & being denied this rebate in FY 2023-24 and 2024-25 — even though the restriction wasn't in force! Only in Indian taxation- future law enforced for past years!!'According to chartered accountant Abhishek Soni, co-founder, Tax2Win: 'Only resident individuals can claim the rebate under Section 87A. You are eligible for this rebate if your total income does not exceed:The rebate amount will be the lower of:Soni says: 'You cannot apply this rebate against tax payable on long-term capital gains taxed under Section 112A. Starting FY 2025–26, the rebate will no longer apply to income taxed at special rates.'Neeraj Agarwala, Partner, Nangia & Co LLP, says:Soni shares his personal experience while filing ITRs for AY 2025–26 (FY 2024–25). Soni says,' the treatment of Section 87A rebate on special rate income is as follows:'The ITR utility does not allow automatic 87A rebate when the total income exceeds Rs 7 lakh includes special rate income like STCG under Section 111A or LTCG under Section 112A. The rebate can only be claimed if the slab-rate income alone is within the Rs 7 lakh limit. So, 87A rebate is not allowed on special rate income under the new regime, as per both the law and portal behavior.''The 87A rebate of Rs 12,500 is allowed even when the income includes special rate income like STCG (111A) or LTCG (112A), as long as the total taxable income (including such income) does not exceed Rs 5 lakh. The rebate is automatically applied in most cases by the ITR utility.'Agarwala from Nangia & Co LLP, says: 'The Excel utility for filing Income Tax Returns for AY 2025–26 includes a comment stating that 'Rebate under Section 87A will be available only on income taxable at normal rates, i.e., after excluding income taxed at special rates under the new tax regime. As these return forms are newly introduced, taxpayers should await further clarification from the Income Tax Department or the implementation of the High Court order before filing their income tax return.'Post July 5, 2024, the income tax return (ITR) filing utilities were not allowing the Section 87A rebate for various special rate incomes, including short-term capital gains on equity shares or equity-oriented mutual funds, taxable at 15% under Section 111A. This issue seems to have persisted till says: 'Under the new tax regime for Incomes taxed at special rates, such as STCG under Section 111A (15%) and LTCG under Section 112A (10%), are excluded from the rebate calculation. As a result, if your income includes such capital gains and pushes your total income beyond Rs 7 lakh, or if your income solely comprises special-rate capital gains, you won't be eligible for the rebate under Section 87A in the new regime.'Soni explains: 'Under the old tax regime, the rebate under Section 87A is available if total taxable income, including income from salary, interest, house property, short-term capital gains (STCG under Section 111A), and other sources, does not exceed Rs 5 lakh. Under the old regime, Short-term capital gains (STCG) are taxes under section 111A. It is included in the income while calculating Rs 5 lakh threshold. However, long-term capital gains (LTCG) taxable under Section 112A are not eligible for rebate under Section 87A, even if the total income remains within the limit.'Soni says: From Budget 2025 (applicable FY 2025‑26/AY 2026‑27) the Section 87A tax treatment is as follows:
Economic Times
2 hours ago
- Business
- Economic Times
10 money myths that are keeping you from maximising your financial worth
Getty Images This Independence Day, we help you break free of 10 myths that are keeping you from maximising your financial worth. For every person who aspires to a smooth financial journey, there are five who stumble their way through it, frequently hitting roadblocks— running short of their goal corpus, making tax blunders, failing to cover health risks, planning succession poorly, making wrong career decisions, among many others. While ignorance and disinterest are often to blame for financial hiccups, misplaced notions and money myths also frequently serve as poor guides. This Independence Day, we help you break free of 10 myths that are keeping you from maximising your financial worth. Young people don't need health insurance. 'The notion that young people don't need health insurance is outdated. Even those in their 20s and 30s can face sudden health setbacks. Accidents, viral infections and illnesses like Covid don't wait for age to catch up,' says Siddharth Singhal, Head of Health Insurance at Policybazaar. Not to mention the rise in lifestyle diseases and chronic conditions like diabetes and hypertension among youngsters. A cover at an early age also means you can serve out the waiting periods for pre-existing diseases while you're healthy and use it without waiting when you actually need it. Myth #2 Retirees should avoid equity life expectancy means more number of years after retirement and a bigger corpus to sustain it. While debt investments like fixed deposits may seem like a safe bet when there is no income generation, you will need the boost of equity to grow your portfolio to keep up with inflation. 'This is why you need a bucket strategy, wherein a portion of the portfolio that you won't need for at least five years is invested in equity,' says Atul Shinghal, Founder and CEO, Scripbox. So equity as an inflation hedge should be an integral part of your portfolio. Myth #3 You don't need to file income tax returns if you have no tax can avoid filing tax returns only if your taxable income is below the basic exemption limit. 'Under the new tax regime, this limit is Rs.3 lakh, and Rs.2.5 lakh in the old regime for those below 60,' says Amit Maheshwari, Tax Partner, AKM Global. Under the new tax regime, a tax rebate under Section 87A is available for resident individuals with a taxable income of up to Rs.12 lakh (raised from Rs.7 lakh). This rebate is applied to your calculated tax, effectively making your tax liability zero. In the old regime, the rebate is available for taxable incomes up to Rs.5 lakh. This doesn't mean you don't have to file returns. Besides, if you have incurred certain expenses (over Rs.2 lakh in foreign travel, Rs.1 lakh in electricity consumption, etc.), it is mandatory to file returns. Also, if you are eligible for a tax or TDS refund, or have to carry forward losses, you will not be able to claim it without filing returns. Myth #4 Tax gains mean you should not prepay your home the years, home loan repayment has offered significant tax benefits—Rs.2 lakh deduction for interest payment under Section 24B and Rs.1.5 lakh for principal repayment under Section 80C. This has led most people to extend the loan repayment to full term. In the new tax regime, however, these tax benefits can pale in comparison to the total deductions available, especially since last year's Budget changes. After the Section 87A rebate, incomes up to Rs.12 lakh can be tax-free. If you enjoy higher tax benefits in the new regime, you can move out of the old regime, giving up the home loan tax advantage (Section 24B deduction is available only on let-out property in new regime). So if you wish to prepay the loan or reduce its tenure, you can do so and enjoy the mental peace that comes from being debt-free. Myth #5 A single income stream is turmoil in the job market that began a few years ago with Covid and ChatGPT has intensified due to AI disruption and economic uncertainty. While the tech sector has witnessed higher volatility, as seen in the recent mass lay-offs by TCS, job uncertainty has become the norm, calling for a back-up in the form of multiple income streams. 'You are just one company downsizing, accident, or an industry disruption away from financial insecurity. Create a safety net with multiple income streams. Start small. Rent out a room at home. Offer a weekend tuition. Save money from your salary to invest in a dividend-generating fund,' says Devashish Chakravarty, Founder & CEO, a job loss assurance company. Myth #6 Mutual fund investments are funds invest in a combination of securities and asset classes, be it stocks, bonds or money market instruments. As such, they have a certain amount of risk associated with all of these. They are perceived to be low-risk instruments only in comparison to direct stock investments. The fact that they invest in assets that are linked to the market means there is no 'risk-free' mutual fund. 'Even a passive index fund that invests in an index like the BSE Sensex or Nifty has equity risk, while debt funds can face interest rate risk, credit risk and liquidity risk,' says Shinghal of Scripbox. Myth #7 Only old people need to have a a will has little to do with age and more to do with the assets you have. Even if you are young and have built financial assets in your name, or have an inheritance, or digital assets, it is best to write a will so you can be sure these will be passed on to the people you want if something were to happen to you. Besides, you can always alter the will whenever you want. 'Many young adults today financially support both their parents and children. Their sudden demise can leave dependants vulnerable. Also, if a spouse remarries, the original family's future may be compromised. Without a will, distribution becomes chaotic— it's not about age, it's about responsibility,' says Raj Lakhotia, Managing Partner, LABH & Associates. Myth #8 You have to save for your child's years, Indian parents have taken upon themselves the financial responsibility not only of their children's education, but also of their weddings. However, it may not be the best financial decision if the parents are compromising their own retirement by diverting the funds to the wedding, or banking on their children to take care of them in retirement. Sponsoring the kids' education and enabling them to become financially independent adults means the children can save for their own weddings or at least bear the costs partially. Busting this myth can be the difference between financial independence in later life and dependence on children. Myth #9 If you have a financial planner,you don't need to check your investment a financial adviser guides you with investments and achievement of goals, it's still your money and you need to monitor how it is being deployed. 'As an involved investor, it is important to understand and check your portfolio periodically, especially in the context of timesensitive goals,' says Shinghal. So, keep an eye on the asset classes being invested in, market conditions, policy changes, and whether you are on track for your goals. Don't try to micromanage, but know the macros and be aware of the portfolio performance. Myth #10 I don't need to share financial information with my you are taking most financial decisions in the family regarding savings and investments, it's crucial that you share this information with your spouse as well, whether (s)he is earning or a homemaker. In case of an eventuality, the uninformed spouse is often left in the lurch, unable to access funds or at the mercy of relatives or strangers to manage them. It's crucial to keep the spouse in the loop not only about all the investments, but also the account numbers, log-ins and passwords to be able to access these. No trending terms available.
Time of India
3 hours ago
- Business
- Time of India
10 money myths that are keeping you from maximising your financial worth
Myth #1 Myth #2 Academy Empower your mind, elevate your skills Myth #3 Myth #4 Myth #5 Myth #6 Myth #7 Myth #8 Myth #9 Myth #10 For every person who aspires to a smooth financial journey, there are five who stumble their way through it, frequently hitting roadblocks— running short of their goal corpus, making tax blunders , failing to cover health risks, planning succession poorly, making wrong career decisions, among many others. While ignorance and disinterest are often to blame for financial hiccups , misplaced notions and money myths also frequently serve as poor guides. This Independence Day, we help you break free of 10 myths that are keeping you from maximising your financial worth 'The notion that young people don't need health insurance is outdated. Even those in their 20s and 30s can face sudden health setbacks. Accidents, viral infections and illnesses like Covid don't wait for age to catch up,' says Siddharth Singhal, Head of Health Insurance at Policybazaar. Not to mention the rise in lifestyle diseases and chronic conditions like diabetes and hypertension among youngsters. A cover at an early age also means you can serve out the waiting periods for pre-existing diseases while you're healthy and use it without waiting when you actually need life expectancy means more number of years after retirement and a bigger corpus to sustain it. While debt investments like fixed deposits may seem like a safe bet when there is no income generation, you will need the boost of equity to grow your portfolio to keep up with inflation. 'This is why you need a bucket strategy, wherein a portion of the portfolio that you won't need for at least five years is invested in equity,' says Atul Shinghal, Founder and CEO, Scripbox. So equity as an inflation hedge should be an integral part of your can avoid filing tax returns only if your taxable income is below the basic exemption limit. 'Under the new tax regime, this limit is Rs.3 lakh, and Rs.2.5 lakh in the old regime for those below 60,' says Amit Maheshwari, Tax Partner, AKM Global. Under the new tax regime, a tax rebate under Section 87A is available for resident individuals with a taxable income of up to Rs.12 lakh (raised from Rs.7 lakh). This rebate is applied to your calculated tax, effectively making your tax liability zero. In the old regime, the rebate is available for taxable incomes up to Rs.5 lakh. This doesn't mean you don't have to file returns. Besides, if you have incurred certain expenses (over Rs.2 lakh in foreign travel, Rs.1 lakh in electricity consumption, etc.), it is mandatory to file returns. Also, if you are eligible for a tax or TDS refund, or have to carry forward losses, you will not be able to claim it without filing the years, home loan repayment has offered significant tax benefits—Rs.2 lakh deduction for interest payment under Section 24B and Rs.1.5 lakh for principal repayment under Section 80C. This has led most people to extend the loan repayment to full term. In the new tax regime, however, these tax benefits can pale in comparison to the total deductions available, especially since last year's Budget changes. After the Section 87A rebate, incomes up to Rs.12 lakh can be tax-free. If you enjoy higher tax benefits in the new regime, you can move out of the old regime, giving up the home loan tax advantage (Section 24B deduction is available only on let-out property in new regime). So if you wish to prepay the loan or reduce its tenure, you can do so and enjoy the mental peace that comes from being turmoil in the job market that began a few years ago with Covid and ChatGPT has intensified due to AI disruption and economic uncertainty. While the tech sector has witnessed higher volatility, as seen in the recent mass lay-offs by TCS, job uncertainty has become the norm, calling for a back-up in the form of multiple income streams. 'You are just one company downsizing, accident, or an industry disruption away from financial insecurity. Create a safety net with multiple income streams. Start small. Rent out a room at home. Offer a weekend tuition. Save money from your salary to invest in a dividend-generating fund,' says Devashish Chakravarty, Founder & CEO, a job loss assurance funds invest in a combination of securities and asset classes, be it stocks, bonds or money market instruments. As such, they have a certain amount of risk associated with all of these. They are perceived to be low-risk instruments only in comparison to direct stock investments. The fact that they invest in assets that are linked to the market means there is no 'risk-free' mutual fund. 'Even a passive index fund that invests in an index like the BSE Sensex or Nifty has equity risk, while debt funds can face interest rate risk, credit risk and liquidity risk,' says Shinghal of a will has little to do with age and more to do with the assets you have. Even if you are young and have built financial assets in your name, or have an inheritance, or digital assets, it is best to write a will so you can be sure these will be passed on to the people you want if something were to happen to you. Besides, you can always alter the will whenever you want. 'Many young adults today financially support both their parents and children. Their sudden demise can leave dependants vulnerable. Also, if a spouse remarries, the original family's future may be compromised. Without a will, distribution becomes chaotic— it's not about age, it's about responsibility,' says Raj Lakhotia, Managing Partner, LABH & years, Indian parents have taken upon themselves the financial responsibility not only of their children's education, but also of their weddings. However, it may not be the best financial decision if the parents are compromising their own retirement by diverting the funds to the wedding, or banking on their children to take care of them in retirement. Sponsoring the kids' education and enabling them to become financially independent adults means the children can save for their own weddings or at least bear the costs partially. Busting this myth can be the difference between financial independence in later life and dependence on a financial adviser guides you with investments and achievement of goals, it's still your money and you need to monitor how it is being deployed. 'As an involved investor, it is important to understand and check your portfolio periodically, especially in the context of timesensitive goals,' says Shinghal. So, keep an eye on the asset classes being invested in, market conditions, policy changes, and whether you are on track for your goals. Don't try to micromanage, but know the macros and be aware of the portfolio you are taking most financial decisions in the family regarding savings and investments, it's crucial that you share this information with your spouse as well, whether (s)he is earning or a homemaker. In case of an eventuality, the uninformed spouse is often left in the lurch, unable to access funds or at the mercy of relatives or strangers to manage them. It's crucial to keep the spouse in the loop not only about all the investments, but also the account numbers, log-ins and passwords to be able to access these.
Time of India
31-07-2025
- Business
- Time of India
ITR filing alert: Rebate on market gains allowed, but not auto-applied
Ahmedabad: Filed your ITR and surprised by a tax bill despite being under the Rs 7 lakh limit under the new tax regime? You're not alone. The income tax portal isn't auto-applying the 87A rebate on stock market gains—but the good news is, you can still claim it manually, say tax experts. To illustrate, if a resident individual has a regular income of Rs 5 lakh and short-term capital gains of Rs 75,000, the tax liability would be Rs 10,000 on the regular income and Rs 15,000 on the STCG (taxed at 20%). The utility currently applies the rebate only to the Rs 10,000 from regular income. However, if the taxpayer manually enters a rebate of Rs 25,000, the system accepts it — effectively reducing the net tax liability to zero. "It is good to note that the Income Tax Department appears to have accepted, in principle, that an eligible taxpayer should be entitled to Section 87A rebate even on capital gains," said Mukesh Patel, international tax expert. "However, this relief should have been auto applied by the ITR utility rather than requiring taxpayers to manually make the claim." You Can Also Check: Ahmedabad AQI | Weather in Ahmedabad | Bank Holidays in Ahmedabad | Public Holidays in Ahmedabad The debate over the applicability of the Section 87A rebate on capital gains first surfaced during ITR filings for AY 2024–25. by Taboola by Taboola Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like People Born 1940-1975 With No Life Insurance Could Be Eligible For This Reassured Undo The confusion centred on whether the rebate was available on STCG from equities under Section 111A and long-term capital gains (LTCG) under Section 112. On July 5, 2024, the Central Board of Direct Taxes (CBDT) instructed the Centralised Processing Centre (CPC) to block such rebate claims in the utility. Taxpayers, however, argued that there had been no change to the language of Section 87A that could justify denial of the rebate. Their argument gained further strength when the Finance Act, 2025, formally amended Section 87A—but only with prospective effect, starting AY 2026–27. This, experts say, effectively vindicates the position that the rebate on capital gains is still valid for AY 2025–26—provided taxpayers proactively claim it while filing their returns.
Time of India
30-07-2025
- Business
- Time of India
Equity market volatility: Will I lose more on taxation if I switch from equity funds to liquid fund?
Tired of too many ads? Remove Ads (Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of .) Switching between mutual funds—whether within the same AMC or to a different one—is not tax-free. It is treated as a redemption followed by a fresh investment , thus attracting capital gains tax. If the original investment was in equity-orient ed mutual funds held for over a year, gains are subject to Long-Term Capital Gains (LTCG) tax. LTCG exceeding Rs 1.25 lakh in a financial year is taxed at 12.5% with indexation. To reduce tax impact, consider redeeming in phases over 3-5 years to utilise the annual exemption. Using direct plans of liquid funds and a Systematic Transfer Plan (STP) can lower costs and manage timing risk. Consult a CA to assess your LTCG liability and explore tax-saving options, especially if your total income is within the Rs 5 lakh slab and eligible for Section 87A rebateAs per Section 47 of the Income-tax Act, 1961, any capital asset transferred as a gift shall not be considered a transfer. Since mutual funds are considered capital assets, transferring them to your father as a gift will not be treated as a transfer and, therefore, you will incur no tax liability on this transfer. Additionally, as per Section 56(2)(x) of the Act, any property received without consideration or for inadequate consideration from a 'relative' is exempt from tax. Notably, mutual funds are covered under the definition of property, and the term 'relative', inter alia, includes a father. Therefore, the mutual funds received by your father will be considered a gift and will be exempt from tax. Consequently, neither you (transferer), nor your father (transferee) will incur any tax liability on this transfer. However, when your father subsequently decides to sell the mutual funds, he will be liable to pay capital gains tax on the sale. Please note that the cost of acquisition for him will be the same as the original cost of acquisition incurred by you (cost to the previous owner), and the holding period will also include the period from the date you purchased the mutual funds. Since the holding period of the mutual funds exceeds 12 months, the sale will result in a long-term capital gain (LTCG). Hence, on the sale of mutual funds, your father will be liable to pay tax on LTCG exceeding Rs 1,25,000 at the rate of 12.5% under Section 112A of the our expertsHave a question for the experts? etwealth@
