Stock Market Profits, No Tax? The 87A Trick Most Investors Miss

If you earn income from the stock market, you might assume you’ll inevitably owe taxes—especially if your profits are from short-term capital gains (STCG), long-term capital gains (LTCG), or intraday trades. But here's the good news: you can legally pay zero tax, thanks to the rebate under section 87A, even on certain stock market gains—if your total income meets specific criteria.

What is Section 87A?

Section 87A of the Income Tax Act provides relief to individual taxpayers by offering a rebate (deduction) from total tax liability, not income.

Here’s how it works:

• If your total income is within the specified income limit for rebate, the tax calculated on your income is reduced (or nullified) by the amount of rebate.
• The rebate under Section 87A is available only to an individual who is resident in India (not HUFs, firms, or companies).

Income Limit for Rebate Under 87A (FY 2024–25)

As per the current rules:

This means if your net total income (after deductions under 80C, 80D, etc., in the old regime) is ₹5 lakh or less, you pay zero tax. Under the new regime, you can earn up to ₹7 lakh without paying any tax—even if it includes capital gains.

Also Read: Section 87A of the Income Tax Act: Tax Rebate for Low-Income Earners Explained

What If You Earn from the Stock Market?

This is where it gets interesting.

Stock market income includes:

• Short-Term Capital Gains (STCG): 15% tax on equity sold within 1 year
• Long-Term Capital Gains (LTCG): 10% tax if gains exceed ₹1 lakh per year
• Business Income: If you’re a trader (intraday, F&O), it's considered business income & taxed as per slab

But here’s the kicker:
If a taxpayer’s total income falls within the basic exemption limit, you can still pay zero tax even if it includes special rate income like STCG or LTCG."

Let’s Understand With a Real Example

Suppose:

• You earned ₹2.5 lakh from salary
• You booked ₹50,000 as short-term capital gain
• Your total income = ₹3 lakh (within exemption limit for all under new regime)

Outcome:
You owe tax on ₹50,000 at 15% (STCG rate) = ₹7,500
But since your total income is below ₹5 lakh (old) or ₹7 lakh (new), you get a rebate of ₹7,500 under Section 87A.

Final Tax Payable: ₹0

That’s right—rebate under Section 87A is available in the form of a deduction from the tax liability, including capital gains.

Basic Exemption Limits – Who Gets What?

Here’s a quick table based on the screenshot you shared:

So, senior citizens (aged 60–79 years) have an exemption limit of ₹3 lakh, and super seniors (80 ) enjoy ₹5 lakh under the old regime.

But under the new tax regime, it’s ₹3 lakh for everyone, regardless of age.

What Income Qualifies for Rebate?

• Salary income
• House property income
• Interest or dividend income
• Short-term & long-term capital gains
• Business income, including trading in stocks

🛑 But remember: 87A is a rebate on total tax liability, not on income directly.

Also Read: The Secret Tax Rebate That Can Cut Your Tax to Zero!

Tips to Pay Zero Tax on Stock Market Gains

1. Split capital gains across financial years
   Book LTCG within ₹1 lakh annually to avoid tax
2. Use tax-saving deductions under 80C, 80D
   Especially in the old regime, bring your taxable income down to rebate thresholds
3. Opt for New Regime if Income ≤ ₹7 lakh
   No need to invest in tax-saving instruments—still zero tax
4. Offset capital losses
   You can adjust capital losses against gains & carry them forward
5. Be careful with intraday/F&O trades
   Treated as business income, so track expenses and declare them accurately"

Do Traders Get Rebate Under 87A?

Yes, if you're an intraday or F&O trader and your net taxable income (after expenses and deductions) is within the rebate limit, you can claim rebate under 87A—even if you’re filing ITR-3.

The rebate is available only to an individual who is resident in India, irrespective of income type.

Final Thoughts

Yes, you can pay zero tax on stock market income—legally—if you plan smartly & stay within the rebate limits. Whether you’re an investor or a trader, understanding how Section 87A works is the key to cutting down your tax burden.

Remember, if a taxpayer’s total income falls within the basic exemption limit, even if it includes capital gains, they can use 87A to nullify the tax—so long as the rebate conditions are met.

Still confused if your stock market gains qualify for 87A rebate? Let experts at Callmyca.com help you file smartly and save tax legally—don’t leave money on the table!