If you are salaried, you do not pay tax up to Rs.12.75 lakh p.a. under the new tax regime as per tax reforms proposed by the Budget 2025-26. The new tax slabs, the standard deduction of Rs.75,000 retained and the 87A rebate hiked to Rs.60,000 make this all possible. Read here.
But there are some caveats here which a tax payer needs to bear in mind. The 87A rebate does not apply to special grade incomes like capital gains – by earning profits from stock market or property under the new tax regime.
So, for example, if you earn a salaried income of Rs.10 lakh and another Rs.2 lakh from equity capital gains, you cannot club them together to your normal income of upto Rs.12 lakh, which is eligible for tax rebate. You will have to separately pay capital gains tax on the Rs.2 lakh income from the stock market. If it is short term gains (shares held for 12 months or less), you pay 20 per cent tax. If it is long term gains (shares held for more than 12 months), you pay 12.5 per cent tax (after adjusting for long term capital gains exemption of Rs.1.25 lakh). In short, if you earn long or short term capital gains, it will trigger tax liability.
There is a possibility though to reduce the capital gains tax liability under the new tax regime. If your total taxable income from salaries and or other income is below the basic exemption limit of Rs.4 lakh, you can adjust the short or long term capital gains against this limit.
For example, suppose you as a retiree are expected to earn Rs.2 lakh annual interest income and Rs.5 lakh from short term capital gains on equity in financial year 2025-26. You can first adjust the interest income of Rs.2 lakh against the basic exemption limit. Next in order, you can adjust the short-term capital gains to the extent of the balance Rs.2 lakh basic exemption limit. So, you will pay short term capital gains tax on the balance Rs.3 lakh (5 lakh-2 lakh), i.e., 20 per cent of Rs.3 lakh which is Rs.60,000.
Hope it is clear that the 87A rebate is applicable to only salaried and other income.