Tax on Capital Gain: In the Union Budget, Finance Minister Nirmala Sitharaman has announced to make annual income up to Rs 12 lakh completely tax-free in the new tax system. This kind of discussion is going on all around. If you’ve really accepted it, you could be tricked. Because under section 87A of income tax, income of Rs 12 lakh has been exempted from tax, the special rate does not apply to income. Earnings from lotteries or equities come under special rate income only. In addition, short-term capital gains and long-term capital gains also fall under this. So, if your annual income is less than Rs 12 lakh, but any part of the income has come from short-term capital gains or long-term capital gains, you have to pay tax on that.
Understand this whole math in this way
Let’s say your annual income is eight lakh rupees. If you have earned three lakh 50 thousand rupees from the lottery that year, your income tax will not be zero. You will have to pay 10 per cent tax on the income of three and a half lakhs. That is, you have to pay Rs 35 thousand to the income tax department. In the remaining short-term and long-term capital, similarly, even if the income is less than 12 lakhs, tax has to be paid. The tax of short-term and long-term capital gains is calculated under section 111A and section 112 respectively. The Section 87A do not apply to them.
Understand the discount of 87-A in the budget as follows
It is important to understand the technical aspect of being tax-free in the new tax regime of income up to 12 lakhs. Under section 87-A, tax on income up to 4 lakhs is zero. Income slabs of four to eight lakh will have to be taxed at 5 per cent, it will be up to 20 thousand rupees. Similarly, the total tax on income slabs ranging from 8 to 12 lakhs can be up to 60 thousand as per ten per cent. This time in the budget, tax exemption up to Rs 60 thousand has been given under 87-A. Thus, income up to Rs 12 lakh has been made tax-free, but under 87-A, this tax exemption will not be available on short-term capital gains or long-term capital gains. In these cases, income less than Rs 12 lakh will also have to be taxed. Even those who will get the exemption less than 87A, the discount money will be credited to the returnee’s bank account after filing the ITR to claim the exemption.
