Under the New Tax Regime, an individual resident taxpayer is eligible for a tax rebate of up to ₹60,000 against his tax liability in respect of normal income, which is taxed at the slab rate. However, as reported by The Economic Times, this rebate cannot be utilized against long-term capital gains tax liability. The taxpayer's normal income of ₹11.40 lakh (salary ₹7.50 lakh, interest ₹3.70 lakh, dividend ₹20,000) falls below the ₹12 lakh threshold, making them eligible for the full rebate of ₹60,000 on normal income tax liability.
The taxpayer redeemed their Equity Linked Saving Scheme (ELSS) for ₹2.40 lakh, generating a long-term capital gain of ₹1.40 lakh after accounting for the initial tax-free limit of ₹1.25 lakh. According to the report, the remaining taxable capital gains of ₹15,000 are subject to a flat rate of 12.50%, resulting in a tax liability of ₹1,875 plus cess of ₹75. The total tax liability on capital gains amounts to ₹1,950.
The remaining ₹6,000 rebate under Section 87A cannot be utilized against the tax liability on long-term capital gains from ELSS redemption. As reported by The Economic Times, the taxpayer must pay tax on the ₹15,000 taxable long-term capital gains separately at the applicable rate of 12.50% plus cess. This separate treatment applies even though the normal income tax liability has been fully covered by the rebate.
