Budget 2025: Understanding the rebate benefits—and the fine print on capital gains tax
«No tax on income up to ₹12 lakh!» The announcement in the Union Budget 2025, made by finance minister Nirmala Sitharaman on 1 February, was music to the ears of many taxpayers. Take Mr. A, for example, who earns from multiple sources. With a salary, interest income, and capital gains from property sales and the stock market, Mr. A’s total income is around ₹12 lakh—seemingly making him eligible for a significant tax break.
But here’s the catch: While Budget 2025 offers a welcome increase in the tax rebate limit, only certain types of income qualify for this benefit. Capital gains, whether from property sales or stock market profits, are excluded from the rebate, meaning Mr. A’s tax savings won’t be as generous as he initially thought.
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Budget 2025 raised the income threshold, under the income tax regime, for the rebate to ₹12 lakh, up from ₹7 lakh, and increased the rebate amount, section 87-A, to ₹60,000 from ₹25,000. On the surface, this is great news for taxpayers.
However, Anurag Jain, a chartered accountant and co-founder & partner at ByTheBook Consulting LLP, clarifies that the rebate applies only to income taxed at the regular slab rates. “It will not be available on income subjected to tax at special rates such as capital gains (long-term and short-term)," he explains.
For Mr. A, this means his salary and interest income will benefit from the rebate, but his capital gains from property and the stock market will be taxed separately—at their special rates. This could significantly reduce his tax savings, despite his total income qualifying for the new rebate limit.
This distinction between regular income and special income has been a point of
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