ITR 2025: Can small equity investors pay zero tax on up to ₹7 lakh income in new tax regime?

However, there is a question these days in the minds of many small equity investors having income of up to ₹7 lakh: Can I get the benefit of paying zero tax in the new regime even if my income includes short-term (STCG) and long-term gains (LTCG) from equity mutual funds and equity shares?

However, the rule clarified by the Finance Act 2025 will apply when filing ITR next year for AY 2026-27. What about ITR for AY 2025-26, which needs to be filed by September 15, 2025? Let's see what the rules say.

But there are two more points related to the above that you must know before filing your ITR:

1. Under the new tax regime, the rebate of ₹25,000 under Section 87A can be claimed for capital gains that are taxed at normal slab rates. For example, gains from debt mutual funds purchased on or after April 1, 2023, or short-term gains from selling a real estate property.

2. If your total income is below the basic exemption limit of ₹3 lakh under the new tax regime, then you will be able to adjust the shortfall against LTCG and STCG from listed shares and equity mutual funds.

For example, suppose your total income is ₹1 lakh and ₹2 lakh as LTCG+STCG from equity mutual funds and listed shares. In this case, the capital gains of ₹2 lakh can be adjusted against the basic exemption limit, making your total tax zero.

What about the old tax regime?

Under the old tax regime, the Section 87A rebate of ₹12,500 is allowed if the taxpayer's total income is under ₹5 lakh. This rebate applies to all types of income, excluding long-term capital gains from equity mutual funds and equity shares under Section 112A.

You should always check the latest e-filing utility and, if in doubt, consult a qualified tax advisor, before filing ITR.