Mon Feb 03 04:02:18 UTC 2025: ## India’s Budget 2025 Offers Tax Relief, But with Caveats

**New Delhi** – India’s latest budget introduces significant changes to the new tax regime, offering substantial tax relief to taxpayers but with important limitations. The most notable change is the increase in the rebate under Section 87A, effectively making incomes up to ₹12 lakh tax-free. However, this relief applies primarily to salary income.

The key caveat is that individuals earning less than ₹12 lakh but also having capital gains will still be liable to pay income tax. The rebate under Section 87A now only applies to salary, pension, interest, rental income, and business income. Capital gains from sources such as the stock market, mutual funds, or property are subject to separate tax rates. Short-term capital gains are taxed at 20%, while long-term capital gains are taxed at 12.5% (on gains exceeding ₹1 lakh). Other income sources like lottery winnings or gambling income are taxed at a higher rate of 30%, and are also ineligible for the Section 87A rebate.

The budget also revised the tax slabs, lowering the tax payable on incomes up to ₹12.75 lakh under the old regime from ₹80,000 to ₹60,000. The increased rebate under Section 87A to ₹60,000 effectively eliminates the tax liability for those earning up to ₹12 lakh solely from salary income.

For example, an individual earning ₹8 lakh in salary and ₹4 lakh in short-term capital gains would have their salary income tax-free due to the rebate. However, they would still owe ₹80,000 (20% of ₹4 lakh) in tax on their capital gains. Similarly, long-term capital gains would be taxed at 12.5% after a ₹1 lakh exemption.

Furthermore, the government raised the TDS threshold on dividend income from ₹5,000 to ₹10,000, providing relief for shareholders. The changes effectively simplify the tax system for many, but individuals with income from multiple sources, particularly capital gains, need to carefully consider the implications.

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