How to Calculate Tax on Equity Capital Gains When It’s Your Only Income in FY 2024-25

Introduction: When Capital Gains Are Your Only Income

As a CERTIFIED FINANCIAL PLANNER™ and mentor at The Richness Academy, I often get asked this nuanced but increasingly relevant question:

“What happens if my only income in a financial year is from capital gains — especially equity?”

This question is more relevant than ever, especially in FY 2024–25, with revised rules around exemption limits, LTCG rates, and ITR reporting post-July 2024. Let me simplify this with an example, practical guidance, and real-life application — in my signature Indian context.

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Step-by-Step: Understanding Equity LTCG Tax Calculation

When your only income in a year is from equity capital gains, a four-step method applies to calculate tax:

Step 1: Deduct ₹1.25 lakh (exempted gains)

Under Section 112A of the Income Tax Act, long-term capital gains (LTCG) above ₹1.25 lakh (earlier ₹1 lakh) are taxable.

 Step 2: Check If It Falls Below Basic Exemption Limit

If your gains after deduction fall below the basic exemption limit, you don’t pay any tax. Otherwise, continue.

Step 3: Deduct Basic Exemption Limit

Your basic exemption limit depends on whether you opt for the old or new tax regime:

• Old Regime: ₹2.5 lakh

• New Regime: ₹3 lakh (as per Budget 2024)

Step 4: Pay 12.5% on the Remaining Amount

The remaining amount is taxed at 12.5% (updated rate from July 2024 onward).

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Practical Example: Mr. A’s ₹5 Lakh Capital Gains in FY26

Let’s walk through a real-world scenario:

Particulars Old Regime New Regime

Capital Gain (A) ₹5,00,000 ₹5,00,000

112A Exemption (B) ₹1,25,000 ₹1,25,000

Basic Exemption Limit (C) ₹2,50,000 ₹3,00,000

Taxable Income (A – B – C) ₹1,25,000 ₹75,000

Tax @ 12.5% ₹15,625 ₹9,375

Insight: Under the new regime, Mr. A pays significantly less tax due to a higher basic exemption limit.

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What Changes After 23rd July 2024?

In Budget 2024, the government announced two different sets of tax rules for capital assets sold before and after 23 July 2024:

Category Sold Before 23 July Sold After 23 July

LTCG Tax Rate 10% 12.5%

Exempted Gains ₹1 lakh ₹1.25 lakh

STCG Rate 15% 20%

This means your transaction date now directly affects your tax calculation. I’m advising all my clients to clearly report gains split before and after this threshold.

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Key Takeaways for Indian Investors

1. LTCG is separate from slab rates

Capital gains are taxed independently of your regular income slabs. This is crucial if your gains are your sole income.

2. Rebate under Section 87A doesn’t apply

Even if your income is under ₹5 lakh, no rebate applies for LTCG.

3. Higher exemption limit favours new regime

A basic exemption of ₹3 lakh makes the new regime more tax-efficient for capital gains-only earners.

4. Don’t forget 112A benefit

Always subtract ₹1.25 lakh from your total gains before applying the basic exemption limit and calculating tax.

5. Separate reporting is mandatory

The ITR forms for AY 2025–26 require separate reporting of gains before and after 23 July 2024 — keep your records clean.

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My Advice as Your Financial Coach

When coaching professionals and retirees who rely mostly on investment income, I strongly recommend this 3-point checklist:

Track sale dates

Ensure you log each equity sale date accurately for FY25. The 23 July 2024 split will impact your tax.

Also read: How I Guide Today’s Youth to Redefine Retirement, Risk, and Richness in India’s New Economic Era

Choose the right tax regime

In many cases, especially for low-income investors or retirees, the new tax regime offers better relief.

Stay invested wisely

Plan your sales to maximize exemptions and minimize tax. Even STCG is now costlier at 20% post-July.

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Conclusion: Plan Ahead, Stay Tax-Efficient

Taxation should never be a surprise — especially when you’re living off capital gains. By aligning your sale strategy with these new rules, you can retain more of your profits and grow your wealth wisely.

At The Richness Academy, I help clients like you navigate such changes without anxiety — so you can focus on living richly.

If you’re unsure which tax regime suits your income pattern or need help reporting capital gains, join my free live webinar this Sunday and get all your doubts cleared.

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