Capital Gain: Filing taxes is a financial part of life for a taxpayer. Often people calculate their income. A taxpayer who had earned Rs 8.15 lakh as short-term capital gain from listed shares and had no other income, wanted to know why the income tax portal was imposing 20 per cent tax despite the total income being less than Rs 12 lakh under the new tax regime.

Taxpayer’s question

A taxpayer on ‘Ask Wallet Wise’ website asked, I have earned short-term capital gain of ₹ 8,15,000 by selling listed shares within 8 months. I don’t have any other income. Since my total annual income is much less than the tax-free limit of Rs 12 lakh under the new tax regime, I feel that my tax liability should be zero due to the exemption under Section 87A. However, the Income Tax Portal is calculating tax at a flat rate of Rs.20. Is there something wrong with the portal?

What advice did the expert give?

In fact, under Section 87A of the Income Tax Act, in the new tax regime, tax exemption up to Rs 60,000 is available. If the taxpayer is an Indian citizen and the income taxable at slab rates does not exceed Rs 12 lakh, then under the new tax regime, the exemption under Section 87A is available only on the tax levied on ordinary income. This exemption is not available for those incomes which are taxable at special rates, even if the total income including such special income does not exceed Rs 12 lakh.

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According to the expert, there is no problem with the portal. If you are a taxpayer as a citizen of a country, then the portal is correctly calculating tax on short-term capital gains from listed shares at a flat rate of Rs 20 lakh after the initial exemption limit of Rs 4 lakh. If you are a non-resident (NRI), you will have to pay 20 per cent tax on the entire short-term capital gains, as there is no facility to set off the shortfall in ordinary income against the marginal exemption in case of short-term capital gains.

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Tax Payers: Usually, during the rush to file income tax returns, some mistakes may not only result in your refund being rejected but also lead to the possibility of notices and penalties. If you miss the deadline, you will have to pay late filing charge under Section 234F of the Income Tax Act.

Depending on the income of the taxpayer and delay in filing, this fine can be up to Rs 5000. If the total income is less than Rs 5 lakh, the maximum penalty for late filing is Rs 1000, and if the total income is more than Rs 5 lakh, the maximum penalty is Rs 5000.

Will penalty be imposed despite zero tax liability?

The most important thing is that if a salaried person has to file ITR by July 31, 2026 and he misses the deadline, he can still file ‘billed return’ till December 31, 2026. However, they may have to pay late filing fees. This rule applies even if their tax liability is zero due to exemption or rebate given by the tax department.

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In such a situation, only those people are not required to file ITR whose income is less than the exemption limit. In the old tax system this basic limit is Rs 2.5 lakh, whereas in the new system it is Rs 4 lakh.

For example, a taxpayer earned Rs 9 lakh in the financial year 2025-26 and was required to file returns by July 31, 2026. If he files returns in November 2026, he can still do so, but he will have to pay a late filing fee of Rs 5,000. Apart from the penalty, if any tax remains outstanding after the due date, the taxpayer may also have to pay interest on it.

ITR deadline for FY26

Actually, the Income Tax Department has set different deadlines according to the taxpayer. Salaried people and those filing ITR-1 or ITR-2 will have to file their returns by July 31. Taxpayers who do not require tax audit and file ITR-3 or ITR-4 have time till August 31. Those whose accounts are required to be tax audited will have to file returns by October 31.

The deadline for taxpayers falling under transfer pricing rules has been fixed as 30th November. If a taxpayer is not able to file the return by the prescribed deadline, he can still file a ‘belated return’ till December 31. Generally, the return can also be improved through ‘Revised Return’ till March 31, 2027.

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