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Can I Claim Deductions Against STCG and LTCG With ELSS Investment?

T S Khurana

T S Khurana   |447 Answers  |Ask -

Tax Expert - Answered on Mar 04, 2025

A certified management accountant since 1993, T S Khurana is a fellow member of The Institute of Cost Accountants of India. His areas of expertise are income tax, specifically litigation cases, and GST.

Since the last 21 years, he has also been providing expert advice on financial matters, including investments and diversification of funds, and wealth building in the long term to his clients.
He believes that investment in real estate is the safest way for better returns and wealth generation over a period of time.

A former chairman of the Chandigarh Chapter of Institute of Cost Accountants of India, T S Khurana has also served as member of its technical committee.... more
BHARAT Question by BHARAT on Feb 09, 2025Hindi
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My wife is retired Her income from STCG from debt funds in this FY is 61000 Her income from LTCG from debt funds is 499000 If she invests Rs 61000 in ELSS will IT DEPT allow rebate of 61000 under section 80c and if so, her taxable income being 499000, will she get rebate under section 87A under the old tax regime

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.
DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Users are advised to pursue the information provided by the rediffGURU only as a source of information to be as a point of reference and to rely on their own judgement when making a decision.
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Ramalingam

Ramalingam Kalirajan  |8221 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Apr 11, 2025

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If income consists of salary ( less than Rs 12 lakh) and ltcg on equity and debt mutual funds and exceeds Rs 12 lakh, will 87A rebate allowed by IT ?
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

..Read more

Latest Questions
Ramalingam

Ramalingam Kalirajan  |8221 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Apr 12, 2025

Asked by Anonymous - Apr 12, 2025Hindi
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I am 38 year old in IT, draws a little over 3L per month, married and 3 kids. First one in 5th standard, second in UKG and third is in play school. Wife working in IT as well drawing 2L per month. We have Two houses - one individual house estimated value (1.5 CR) with 18L loan pending paid by me (26.5k per month EMI) and other apartment nearing completion estimated value (1CR) with 50L loan pending paid by my wife (47k per month EMI). As far as other savings are concerned I have around 50L in MFs and my wife has 20L. I have 5L in stocks, 5L in FDs and 5L in other markets. My PF value is around 25L. My wife PF and Gratuity together around 20L. We have Vehicles estimated to give 10L. Currently living in a metro city for our work with expenses upto 2L per month including loans, kids education, rent etc Please tell us what more needed for us to retire and move to less expensive tier 2 place where living expenses can be between 50k - 1l name month.
Ans: Current Financial Overview
Age: 38 years

Monthly Income: Rs. 5 lakh (combined)

Monthly Expenses: Rs. 2 lakh (including EMIs)

Assets:

Mutual Funds: Rs. 70 lakh

Stocks: Rs. 5 lakh

Fixed Deposits: Rs. 5 lakh

Other Investments: Rs. 5 lakh

Provident Fund: Rs. 45 lakh (combined)

Vehicles: Rs. 10 lakh

Liabilities:

Home Loan 1: Rs. 18 lakh (EMI: Rs. 26,500)

Home Loan 2: Rs. 50 lakh (EMI: Rs. 47,000)

Retirement Corpus Estimation
Target Monthly Expenses Post-Retirement: Rs. 1 lakh

Expected Retirement Age: 50 years

Life Expectancy: 85 years

Inflation Rate: 6%

Expected Return on Investments Post-Retirement: 8%

Based on these assumptions, you would require a retirement corpus of approximately Rs. 6 crore to maintain your desired lifestyle in a tier-2 city.

Children's Education Planning
Child 1: Currently in 5th standard

Child 2: Currently in UKG

Child 3: Currently in play school

Assuming higher education costs of Rs. 25 lakh per child in today's terms and considering an education inflation rate of 10%, the future cost for each child could be significantly higher. Therefore, it's essential to start dedicated investments for each child's education.

Action Plan
Increase Savings: Aim to save at least 40% of your combined monthly income.

Debt Reduction: Prioritize paying off high-interest debts to reduce financial burden.

Investment Strategy:

Continue investing in mutual funds with a focus on long-term growth.

Diversify your portfolio to include a mix of equity and debt instruments.

Emergency Fund: Maintain an emergency fund equivalent to 6 months of expenses.

Insurance:

Ensure adequate life insurance coverage for both you and your wife.

Obtain comprehensive health insurance for the entire family.

Final Insights
You're on a solid financial path with a strong income and investment base.

Focus on increasing your savings rate and reducing liabilities.

Plan systematically for your children's education expenses.

Regularly review and adjust your investment portfolio to align with your retirement goals.

Consider consulting a Certified Financial Planner to tailor a comprehensive financial plan for your family's needs.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

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

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Hii sir muje aaose puchhna hai mere bete ne ssc kiboard ki exam fi hai aage ki padhai k bare me thoda confuse hai hambe dmit bhi karvaya ...to dmit k councelar ne hame science stram lene se mana kar diya hai aur engineering me bhi dalne se mana kiya hame use cse diploma me karvana chahte the lekin councelar ne commers aur arts me jane ki salah di hai dmit test par kitna trust karna chahiye kya kare
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Talk to your son — ask what he enjoys or dreams about. Use DMIT + school marks + family guidance together to decide. Don’t choose a stream only because “DMIT said so” or “log kya kahenge.” All the best for your Son's Bright Future!

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Nayagam P

Nayagam P P  |4417 Answers  |Ask -

Career Counsellor - Answered on Apr 12, 2025

Asked by Anonymous - Apr 09, 2025Hindi
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sir mene 2022-2023 baords diya tha pass nhi hua 2023-2024 diya hn pass hoga but percentage km aye then 2024-2025 krliya hn 90 percent aaye hn isme mene as a regular students karya hn naaki ki improvemnt likha nhi aayega school balo ne confirm kiyaa hn kya ab jee de skta mains and adv 2026 mein iwant to scoore good in adv sir 2026 with good rank
Ans: Your Academic History Recap: 2022-2023: Gave boards – Did not pass.2023-2024: Gave boards again – Passed, but low percentage. 2024-2025: Appeared as a regular student, scored 90%, and the school confirmed it won’t show as improvement. Are You Eligible for JEE Main & Advanced 2026? Yes, you are eligible for both JEE Main and Advanced 2026, because only your latest qualified attempt is considered, which is 2025. You passed 12th in 2025, so your first JEE Advanced attempt will be in 2025, and second in 2026 (which is what you’re planning). Make sure your 2025 mark sheet shows you as a regular pass and not an "improvement candidate. In JEE Advanced, eligibility criteria say: "A candidate should have appeared for the Class 12 (or equivalent) examination for the first time in either the previous year or the current year." You are within this rule because 2025 is your first full qualified passing year. Plan to Score High in JEE Advanced 2026. Since you have a full year to prepare, here’s a strategy: Focus on Concepts: Use NCERT, HC Verma, Irodov, Cengage, or MS Chauhan as per subjects. Join any reliable online Test Series. Solve PYQs (Last 20 years): For both Mains and Advanced. Revise Smartly: Make short notes, formula sheets, and track your weak areas. Stay Consistent: Use Pomodoro technique, meditation/yoga to stay sharp. If time permits, watch EduJob360 YouTube Videos on Engineering Entrance Exams, Preparation Strategies, Counselling & More. All the best for your preparation & admissions!

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DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Investment in securities market are subject to market risks. Read all the related document carefully before investing. The securities quoted are for illustration only and are not recommendatory. Users are advised to pursue the information provided by the rediffGURU only as a source of information and as a point of reference and to rely on their own judgement when making a decision. RediffGURUS is an intermediary as per India's Information Technology Act.

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