Income Tax Rules: Income up to Rs 12.75 lakh is tax free, but rules are different for special income; know why?

Income Tax: Under the new tax regime, income up to Rs 12.75 lakh is tax free. But in the old tax regime, no tax has to be paid on income up to Rs 5 lakh. But under this, you can claim different types of investments.

Income Tax Rules: When Finance Minister Nirmala Sitharaman announced during the budget speech on February 1, 2025 that under the new tax regime, income tax will not have to be paid on income up to Rs 12 lakh. At that time the entire house echoed with thunderous applause. After some time, when she told that apart from this income, the benefit of standard deduction of Rs 75000 will also be available, the happiness of the taxpayers increased further. Accordingly, in the budget 2025-26, income up to Rs 12.75 lakh has been declared tax free under the New Tax Regime. Which is with a standard deduction of Rs 75,000.

No tax will be required on income up to Rs 12.75 lakh

But you may not know that if any of your special income like short-term or long-term capital gain is not included in this exemption. Under the new tax regime, no tax will have to be paid on income up to Rs 12.75 lakh. But according to the Finance Act-2025, the tax exemption available under Section 87A will not be applicable on taxes levied at special rates, such as Section 111A (short-term capital gain) and Section 112A (long-term capital gain). This clearly means that you may have to pay income tax on short term and long term capital gain.

How much exemption is available under section 87A?

Experts say that the rule to remove the exemption of section 87A on special income has been added in the budget 2025. It has been implemented from the financial year 2025-26 (AY 2026-27). But at present, this exemption is not available on special income even for the financial year 2024-25. Currently, full tax exemption is available under section 87A on income up to Rs 7 lakh in the new tax regime and up to Rs 5 lakh in the old tax regime.

Tax will have to be paid in this condition

The current income tax return software does not give exemption of section 87A on special rate income. Due to this, people with income less than Rs 7 lakh, whose income is mainly from capital gains tax, may have to pay tax. Experts say that the Income Tax Department should clarify whether this rule will be applicable from FY 2024-25. If your income is less than Rs 12.75 lakh, then you will not have to pay tax in the new regime. But if your income is from the stock market or other special sources, then you may have to pay tax.

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The post Income Tax Rules: Income up to Rs 12.75 lakh is tax free, but rules are different for special income; know why? first appeared on informalnewz.

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