Zero Tax Relief for Salaried Taxpayers, But STCG Remains Taxable at 15%

The Union Budget 2025 has introduced a big relief for salaried taxpayers. Thanks to the enhanced Section 87A rebate, individuals with income up to ₹12.75 lakh under normal slab rates will pay zero tax.

But here’s the twist: Short-Term Capital Gains (STCG) on equity shares and mutual funds are not covered under this rebate. They remain taxable at a flat 15%, regardless of your total income.

Key Points Explained

Section 87A Rebate

• Applies only to income taxed under normal slab rates.
• Does not apply to incomes taxed at special rates (STCG, LTCG, business income).

STCG Taxation

• Equity shares and equity-oriented mutual funds held for less than 12 months fall under STCG.
• Taxed at 15% flat rate, plus cess and surcharge.
• This tax is independent of slab benefits or the 87A rebate.

Why Excluded?

• To prevent misuse of the rebate by traders.
• Ensures fair tax collection from capital market gains.
• Maintains discipline in speculative trading.

Practical Examples

Salary + STCG

• Salary: ₹10 lakh
• STCG: ₹2 lakh
• Tax: STCG ₹2 lakh × 15% = ₹30,000 (+ cess)
• Salary income exempt under 87A, but STCG taxed separately.

Only STCG Income

• STCG: ₹4 lakh
• Tax: ₹4 lakh × 15% = ₹60,000 (+ cess)
• No rebate benefit, even though income < ₹12.75 lakh.

Implications for Taxpayers

Salaried Individuals (no trading income):

• Big win  zero tax up to ₹12.75 lakh.
• Encourages savings and consumption.

Investors & Traders:

• Must pay STCG tax separately.
• No rebate benefit, even if overall income is below ₹12.75 lakh.
• Careful tax planning needed to manage gains.

Takeaway

The Budget 2025 is generous for salaried taxpayers but keeps capital gains taxation intact. If you earn from trading or investing, remember:

STCG = 15% flat tax, no rebate.

Plan your investments with this in mind.

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