My mother is a senior citizen. Her income through pension , FD interest, etc is Rs. 3,50,000/- and LTCG through sale of equity is 1,50,000/- Thus making the total income Rs. 500,000/- . Will she qualify for rebate under section 87A. How will the tax be calculated? Will investment under section 80C save any tax? My query is for the current financial year. Please guide.

Ans: 01. Kindly note that Tax Rebate u/s 87A is not available if your taxable income exceeds Rs.5,00,000.00, in old tax regime also. I feel in this case taxable income would be more under different heads like Pension & Interest Income etc.
02. Deduction u/s 80-C would be available, if you invest in ELSS. This will effect your other income Like Salary/Pension, STCG & Income from Interest etc.
Most welcome for any further clarification. Thanks.

Ans: Let us now assess the situation in a very simplified way.

You are earning a salary.
Your salary is less than Rs 12 lakh per year.
You also have long-term capital gains (LTCG).
You have LTCG from equity mutual funds.
You also have LTCG from debt mutual funds.
Your total income, including LTCG, is more than Rs 12 lakh.

So, will you get the Section 87A rebate?

Let us look at the law and assess it properly.

Who Can Claim 87A Rebate?

You must be a resident individual in India.

Your total taxable income must be less than or equal to Rs 7 lakh.

If income crosses Rs 7 lakh, even by Rs 1, rebate will not apply.

The rebate under Section 87A is Rs 25,000 (for FY 2024-25) under the new tax regime.

If you are under the old tax regime, rebate is Rs 12,500 if income is below Rs 5 lakh.

What is Total Taxable Income?

It includes salary, capital gains, interest, rental, etc.

It means your entire income after deductions.

Deductions include 80C, 80D, NPS, home loan interest, etc.

Even capital gains are part of total taxable income.

LTCG on equity funds is tax-free up to Rs 1.25 lakh now.

Anything above Rs 1.25 lakh in LTCG will be taxed at 12.5%.

Debt mutual fund gains are taxed as per your income tax slab.

So, LTCG is included in total income.

Impact of LTCG on Rebate Eligibility

If total income, after all deductions, is above Rs 7 lakh, you are not eligible.

Even if salary is low, LTCG can push income above Rs 7 lakh.

So, 87A rebate is not available if income crosses Rs 7 lakh.

No partial rebate is given if it exceeds by just a small amount.

Simple Summary With Example

Salary: Rs 6.5 lakh

LTCG on equity: Rs 2 lakh

Exempt LTCG: Rs 1.25 lakh

Taxable LTCG: Rs 75,000 (tax at 12.5%)

Total taxable income: Rs 7.25 lakh

Since income > Rs 7 lakh, no rebate under 87A allowed.

You will pay tax on full income as per new tax regime.

Suggestion from Certified Financial Planner

You can use deductions like 80C, 80D, NPS, etc.

These deductions help in bringing total income below Rs 7 lakh.

If total income is reduced to Rs 7 lakh or less, then 87A rebate will apply.

Plan gains carefully to avoid crossing Rs 7 lakh limit.

Spread sale of equity mutual funds across different financial years.

Or use loss harvesting to lower LTCG in the same year.

Key Reminders on Mutual Fund Taxation Rules

For equity mutual funds:

LTCG above Rs 1.25 lakh taxed at 12.5%.

STCG taxed at 20%.

For debt mutual funds:

Both LTCG and STCG taxed as per your income slab.

No indexation benefit anymore.

This increases tax burden significantly for high-income investors.

Disadvantages of Index Funds

Index funds don’t beat the market.

They only match the market returns.

No downside protection during falling markets.

Fund manager has no control over stock selection.

All stocks in index are included even if they perform poorly.

Volatility is high during market corrections.

No active risk management.

They do not suit goal-based long-term investing.

Benefits of Actively Managed Funds

Expert fund managers select high-quality stocks.

They aim to beat market returns.

More research-backed approach.

Better downside risk control.

Flexibility in asset allocation and stock selection.

Good for long-term wealth creation with proper diversification.

Ideal for retirement, children’s education, and wealth building.

Disadvantages of Direct Mutual Funds

No expert guidance is available.

You may choose wrong funds without support.

Portfolio can become unbalanced.

No monitoring or review by experts.

Performance may be inconsistent without strategy.

Direct plans may seem cheaper but can lead to losses.

Why Regular Funds via CFP are Better

Certified Financial Planners guide you on the right fund mix.

You get regular reviews and updates.

Portfolio is aligned to your goals and risk.

You get handholding during market ups and downs.

Helps in staying disciplined and systematic.

Mistakes are avoided through expert review.

Final Insights

Section 87A rebate is simple but strict.

It is based on your total income after deductions.

LTCG on mutual funds is fully considered in total income.

If total income exceeds Rs 7 lakh, rebate is lost.

You must plan gains and deductions wisely.

Reduce LTCG through staggered redemptions.

Use tax-saving options under 80C, 80D, NPS, etc.

Avoid relying on index funds.

Choose active mutual funds with better performance scope.

Avoid direct funds without proper knowledge.

Get help from a Certified Financial Planner.

Your financial journey will be safer and more confident.

Tax saving and goal achievement can go together.

Don’t miss opportunities to plan better.

Tax efficiency and smart fund choices matter every year.

A good planner will help you stay tax-smart and wealth-ready.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment