Will my capital gains below ₹5 lakh be taxed if I have no other income?

​My taxable income is below the ₹5 lakh tax rebate limit. ​If I earn ₹4 lakh in long-term capital gains (LTCG) and have no income from any other source for the relevant financial, how will the gains be taxable?

—Name withheld on request 

As per the provisions of Income-tax Act, capital gains arising from transfer of a long-term capital asset being equity share in a company or units of equity oriented mutual fund, shall be taxed at 10% (plus applicable surcharge and cess) on capital gains exceeding ₹1 lakh, if STT (securities transaction tax) has been paid at the time of acquisition and transfer of such capital asset.

LTCG arising from other capital assets are taxed as per the respective/applicable provisions and tax rates.

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An individual, qualifying as resident as per the provisions of Income-tax Act, is eligible to consider the benefit of progressive slab rates and can adjust the basic exemption limit ( ₹3 lakh under new default tax regime and ₹2.5 lakh under old tax regime for non-senior citizen taxpayers) against LTCG, as may be remaining after adjustment against incomes other than capital gains, to the extent prescribed.

Further in case of a resident individual, tax rebate of up to ₹25,000 is available where total income does not exceed ₹7 lakh (under new tax regime) or up to ₹12,500 where total income does not exceed ₹5 lakh (under old tax regime). However, such benefit is not available in case of LTCG arising from sale of equity share / units of equity oriented mutual fund, taxed at special rate of 10%.

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Thus, on an assumption that the LTCG of ₹4 lakh is arising from sale of STT paid equity shares/equity oriented mutual funds, LTCG up to ₹1 lakh is not taxable. The balance LTCG of ₹3 lakh shall be adjusted against the available basic exemption limit under the new tax regime, provided you are a tax resident of India for the relevant financial year and assuming you do not have any income other than the LTCG.

Parizad Sirwalla is partner and head, global mobility services, tax, KPMG in India.

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Published: 05 May 2024, 04:03 PM IST