Latest news with #Section111A
Economic Times
02-07-2025
- Business
- Economic Times
Think market income below Rs 12 lakh is tax free? TaxBuddy founder warns how this common mistake could attract big tax notice
Many Indian retail investors are surprised to learn that earning under ₹12 lakh in the stock market doesn't guarantee tax exemption. Confusions arise from overlooking how different income types are taxed, such as intraday trading, F&O, STCG, and LTCG. Understanding income classification is crucial for accurate tax calculation and avoiding unexpected notices. Tired of too many ads? Remove Ads Breakdown of the investor's income ₹3 lakh in intraday losses ₹2.5 lakh from futures and options (F&O) gains ₹3.5 lakh in short-term capital gains (STCG) ₹4 lakh in long-term capital gains (LTCG) The total profit was under ₹12 lakh. However, that did not make it exempt from tax. Tired of too many ads? Remove Ads Tax confusion is common Retail investing surge meets tax surprises A growing number of retail investors in India are discovering that earning less than ₹12 lakh from stock markets does not automatically mean a tax exemption. According to Sujit Bangar, founder of investors often get caught off guard because they overlook how each type of income is taxed under different a recent example, Bangar highlighted the case of a full-time investor who earned ₹7 lakh from the market. Expecting zero tax, the investor instead received a tax notice demanding ₹74, investor's earnings included:How tax rules treat different incomesTax laws treat each income type separately:Intraday trading: Treated as speculative business income, taxed at slab rates, and losses can only be adjusted against speculative profits. Losses can be carried forward for four and Options (F&O): Classified as non-speculative business income, taxed at slab rates. Losses have broader set-off options and an eight-year carry-forward capital gains (STCG): Taxed at a flat rate of 20% under Section 111A. STCG losses can offset both STCG and capital gains (LTCG): Only ₹1.25 lakh is exempt under Section 112A. Any amount above that is taxed at 12.5%. No indexation benefits or Section 87A rebate confuse low income with low tax,' Bangar said in a detailed LinkedIn post. 'Understand how each income is classified—and taxed.'He pointed out that the investor's mistake was not the profit amount but how the gains were treated under tax law. 'What got him in trouble wasn't profit—it was classification.'Bangar's post comes at a time when millions of Indians are entering the stock market through trading apps, often without full knowledge of tax laws.'Tag someone who trades but thinks ₹12L = 'tax-free zone,'' Bangar wrote. His message underlines the importance of understanding tax rules before new and existing investors, the key takeaway is this: knowing how your income is classified matters more than how much you earn.
India Today
02-07-2025
- Business
- India Today
Investor earns Rs 7 lakh, faces Rs 74,000 tax despite Rs 12 lakh limit. Know why
A tax expert has explained how a retail investor who earned Rs 7 lakh in stock market profits ended up with a tax demand of Rs 74,375. The case highlights how misreading the nature of income can lead to unexpected tax liabilities, even when total earnings seem Bangar, founder of and a former IRS officer, shared the example on LinkedIn to warn investors against a common misconception. The investor, Rahul, believed that since his total income was below Rs 12 lakh, he would not be liable to pay tax. What he overlooked was how different types of market income are treated under the tax earnings included a Rs 3 lakh loss from intraday trading, a Rs 2.5 lakh gain from futures and options, Rs 3.5 lakh in short-term capital gains from equities, and Rs 4 lakh in long-term capital gains. After subtracting the losses, he assumed that his Rs 7 lakh net income was tax-free. However, Bangar pointed out that the tax system does not allow such aggregation. Each category of income is assessed and taxed separately, with its own rules, exemptions, and set-off trading is treated as speculative business income. It is taxed at the individual's slab rate, and any losses can be adjusted only against speculative gains. If not utilised, such losses can be carried forward for four and options are considered non-speculative business income under Section 43(5). These are also taxed at slab rates, but the losses can be set off against a wider range of incomes except salary, and carried forward for up to eight capital gains, such as those from selling equities within a year, fall under Section 111A. These gains are taxed at a flat rate of 20 percent. While losses in this category can be adjusted against both short- and long-term capital gains, they do not qualify for basic income capital gains from listed equities are covered under Section 112A. The first Rs 1.25 lakh in gains is exempt, but any amount above that is taxed at 12.5 percent. There is no indexation benefit, and losses here can only be set off against other long-term capital also clarified that the Section 87A rebate of up to Rs 12,500, available to individuals with taxable income under Rs 5 lakh, does not apply to long-term capital gains under Section real issue, according to him, was not how much Rahul earned but how that income was classified. Many investors make the mistake of treating their total earnings as one pool, ignoring the rules specific to each warning comes at a time when market participation by retail investors is surging, driven by app-based trading platforms. For many, the complexity of tax treatment remains an afterthought until the tax bill arrives.'Don't confuse low income with low tax,' Bangar wrote. 'Understand how each income is classified and taxed.'His message is clear: market profits are no guarantee of tax freedom unless investors understand the fine print.- Ends
Time of India
02-07-2025
- Business
- Time of India
Think market income below Rs 12 lakh is tax free? TaxBuddy founder warns how this common mistake could attract big tax notice
Many Indian retail investors are surprised to learn that earning under ₹12 lakh in the stock market doesn't guarantee tax exemption. Confusions arise from overlooking how different income types are taxed, such as intraday trading, F&O, STCG, and LTCG. Understanding income classification is crucial for accurate tax calculation and avoiding unexpected notices. Tired of too many ads? Remove Ads Breakdown of the investor's income ₹3 lakh in intraday losses ₹2.5 lakh from futures and options (F&O) gains ₹3.5 lakh in short-term capital gains (STCG) ₹4 lakh in long-term capital gains (LTCG) The total profit was under ₹12 lakh. However, that did not make it exempt from tax. Tired of too many ads? Remove Ads Tax confusion is common Retail investing surge meets tax surprises A growing number of retail investors in India are discovering that earning less than ₹12 lakh from stock markets does not automatically mean a tax exemption. According to Sujit Bangar, founder of investors often get caught off guard because they overlook how each type of income is taxed under different a recent example, Bangar highlighted the case of a full-time investor who earned ₹7 lakh from the market. Expecting zero tax, the investor instead received a tax notice demanding ₹74, investor's earnings included:How tax rules treat different incomesTax laws treat each income type separately:Intraday trading: Treated as speculative business income, taxed at slab rates, and losses can only be adjusted against speculative profits. Losses can be carried forward for four and Options (F&O): Classified as non-speculative business income, taxed at slab rates. Losses have broader set-off options and an eight-year carry-forward capital gains (STCG): Taxed at a flat rate of 20% under Section 111A. STCG losses can offset both STCG and capital gains (LTCG): Only ₹1.25 lakh is exempt under Section 112A. Any amount above that is taxed at 12.5%. No indexation benefits or Section 87A rebate confuse low income with low tax,' Bangar said in a detailed LinkedIn post. 'Understand how each income is classified—and taxed.'He pointed out that the investor's mistake was not the profit amount but how the gains were treated under tax law. 'What got him in trouble wasn't profit—it was classification.'Bangar's post comes at a time when millions of Indians are entering the stock market through trading apps, often without full knowledge of tax laws.'Tag someone who trades but thinks ₹12L = 'tax-free zone,'' Bangar wrote. His message underlines the importance of understanding tax rules before new and existing investors, the key takeaway is this: knowing how your income is classified matters more than how much you earn.
Time of India
02-05-2025
- Business
- Time of India
Row over rebate on capital gains tax settled in taxpayers' favour
Ahmedabad: The rebate row over capital gains tax has taken a decisive turn. With the Centre amending Section 87A through the Finance Act, 2025, the law now clearly denies rebates on income taxed under special rates, including capital gains. Tired of too many ads? go ad free now But here's the twist — the change is forward-looking, not retrospective. That gives taxpayers a strong legal footing to claim missed rebates from previous years. The debate over the eligibility of rebate under Section 87A of the Income-Tax Act — particularly concerning tax on short-term capital gains (STCG) from equity shares under Section 111A and long-term capital gains (LTCG) from listed securities under Section 112 — has been a long-standing one. The Central Board of Direct Taxes (CBDT), in its Budget 2025 FAQs, clarified that rebates under Section 87A are only available for taxes calculated as per slab rates under the new tax regime (Section 115BAC) and not on capital gains, lotteries, or other special-rate incomes. International tax expert Mukesh Patel explained that the legislative amendment now restricts the rebate to only the tax payable under Section 115BAC(1A). "This amendment, applicable from Assessment Year 2026–27, shuts the door on future claims based on capital gains. But since it has been made prospectively, taxpayers can still claim such rebates for AYs 2024–25 and 2025–26," he said. This update could offer significant relief to many taxpayers who faced rejection of their rebate claims after the CBDT, on July 5, 2024, instructed the Centralised Processing Centre (CPC) to block such claims in the ITR utility. Tired of too many ads? go ad free now The govt had earlier enhanced the scope of rebate — increasing the income threshold from Rs 5 lakh to Rs 7 lakh and the rebate amount from Rs 12,500 to Rs 25,000 — to push taxpayers toward the new regime under Section 115BAC. However, the tax department refused to extend these benefits to capital gains incomes, which sparked protests and legal challenges. "The Bombay high court directed the reopening of the ITR utility. However, the department continued to reject claims for rebate in this regard, without heeding the view that taxpayers could not be deprived of their legitimate claim, as there was no amendment in law to support its interpretation," said Patel. Mukesh Patel said, "After above-referred amendment, introduced only with prospective effect, there is no room for controversy any longer. Taxpayers can easily defend their claims under appeal or even press for relief by way of revision or rectification in respect of concluded matters for Assessment Year 2024-25."
