Understanding rebate benefits and fine print on capital gains tax

Higher tax rebate under the new regime offers relief, but exclusions on capital gains limit overall benefits

- Aprajita Sharma

No tax on income up to ₹12 lakh! The announcement in the Union Budget 2025 by finance minister Nirmala Sitharaman on 1 February was music to the ears of many taxpayers.

Take Mr. A, for example, who earns from multiple sources. With a salary, interest income, and capital gains from property sales and the stock market, Mr. A's total income is around ₹12 lakh—seemingly making him eligible for a significant tax break.

But here's the catch: While Budget 2025 offers a welcome increase in the tax rebate limit, only certain types of income qualify for this benefit. Capital gains, whether from property sales or stock market profits, are excluded from the rebate, meaning Mr. A's tax savings won't be as generous as he initially thought.

Budget 2025 raised the income threshold, under the income tax regime, for the rebate to ₹12 lakh, up from ₹7 lakh, and increased the rebate amount, section 87-A, to ₹60,000 from ₹25,000. On the surface, this is great news for taxpayers.

However, Anurag Jain, a chartered accountant and co-founder & partner at By The Book Consulting LLP, clarifies that the rebate applies only to income taxed at the regular slab rates. "It will not be available on income subjected to tax at special rates such as capital gains (long-term and short-term)," he explains.