Income Up to ₹12 Lakh Is Tax-Free" — Then Why Does Your ITR Show Tax Due? The Capital Gains Trap
"Income up to ₹12 lakh is tax-free now" — you've heard it everywhere since Budget 2025. So you file your return with ₹9 lakh of salary and a couple of lakhs of stock market gains, expecting zero tax… and the portal shows a demand. Nothing is broken. You've just met the least-advertised fine print of the new regime: the ₹12 lakh rebate doesn't cover capital gains. Here's exactly how the trap works, who falls into it, and what you can still do about it. What the ₹12 lakh headline actually says For FY 2025-26 (AY 2026-27), under the new regime, the Section 87A rebate of up to ₹60,000 wipes out the tax on total income up to ₹12 lakh — and with the ₹75,000 standard deduction, a salaried person is effectively tax-free up to ₹12.75 lakh . All true. The fine print: the rebate applies to tax computed at normal slab rates . Income taxed at special rates sits outside it — most importantly: Short-term capital gains on listed equity/equity funds (Section 111A)...