Finance Minister Nirmala Sitharaman has announced in the budget that if your income is Rs 12 lakh annually, then you will not have to pay any tax. Also, in the new tax regime, the basic tax exemption has been increased from Rs 3 lakh to Rs 4 lakh. However, if this income is from the stock market, then how much tax will you have to pay? Let’s know the complete calculation…
Giving relief to the middle class in the budget, Finance Minister Nirmala Sitharaman announced ‘0’ tax on annual income up to 12 lakhs. Which means that you do not have to pay tax on income up to 12 lakhs, but this is not for all types of income. You are not going to get this tax exemption for some income.
If your income includes special rate income, then you will have to pay tax. Even if the income is 12 lakh or less than 12 lakh rupees? In such a situation, if you earn up to Rs 12 lakh only from mutual funds or shares, that is, the special income is 12 lakhs, then after the basic exemption of up to Rs 4 lakh in the new tax regime, you will have to pay tax on the remaining amount according to LTCG, STCG.
The reason for this is that your tax liability will not be zero on this income under section 87A. It has been clarified in Budget 2025 that the income which is taxed at a special rate will not get the benefit of income tax exemption under the new tax regime under section 87A. This includes income like capital gain under section 111A (short term capital gain), section 112 (long term capital gain) etc.
On what basis will the calculation be done
However, now you will also have this question in your mind that how much this tax will be levied and on what basis will it be calculated. You can understand this in some easy way. Suppose you are earning Rs 8 lakh from salary. Apart from this, if you are earning Rs 12 lakh by selling shares or from mutual funds, then no tax will have to be paid on Rs 8 lakh, but tax will have to be paid on the remaining 12 lakh under special rate. In this, LTCG will be taxed at the rate of 12.50% and STCG at the rate of 20%.
How much tax will be levied on earning from shares or mutual funds?
But if you earn a profit of up to Rs 12 lakh from shares or mutual funds within just 12 months, then short term capital gain tax will be levied on it. On this income, first of all, the basic exemption of Rs 4 lakh will be reduced according to the new tax slab. That is, you will have to pay 20 percent STCG on Rs 8 lakh.
- 12 lakh – Rs 4 lakh = Rs 8 lakh
- 20% tax on 8 lakh = Rs 1 lakh 60 thousand tax will have to be paid.
Tax on selling stock or mutual fund after holding it for more than 12 months?
If you hold a stock or fund for more than 12 months and then sell it, your profit is Rs 12 lakh. In such a case, first Rs 1 lakh 25 will be deducted from Rs 12 lakh, because under long term capital gain, profit up to Rs 1.25 lakh is exempted. After this, the basic exemption will be reduced by Rs 4 lakh in the New Tax Slab. This means that now you will have to pay tax of 12.5 percent on only Rs 6 lakh 75 thousand.
- Long term earnings from share market = Rs 12 lakhs
- Taxable income after reducing long term exemption limit of Rs 1.25 lakh = Rs 10 lakh 75 thousand
- Now under the new income tax slab, after reducing the basic exemption limit of Rs 4 lakh, taxable income = Rs 6 lakh 75 thousand
- 12.5% ​​long term capital gain tax on Rs 6 lakh 75 thousand = Rs 84,375
This means that if you do not have any salaried income, and you earn Rs 12 lakh annually from shares or mutual funds in the long term, then you will have to pay tax of Rs 84,375 on the basis of this calculation.
Income with special rate
According to the Income Tax Department, rebate exemption is not given on capital gain, lottery or special rate. This is available only on tax payable as per the slab under section 115BAC. Under section 87A, taxpayers get a rebate on income up to Rs 5 lakh in the old tax regime which has now been increased to Rs 12 lakh in the new tax regime. The maximum amount of tax rebate under section 87A in the old tax regime is Rs 12,500 and it is proposed to increase it to Rs 60,000 under the new tax regime.
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