How Much Income Is Non-Taxable in FY 2025-26 If You Earn Only From STCG, LTCG, Dividends, and Interest?
For investors earning only from capital gains, dividends, and interest, understanding what portion of your income is tax-free under the FY 2025-26 rules is essential. The Finance Act 2024 introduced new tax slabs and updated the long-term and short-term capital gains structure. Here’s a simplified explanation of what is taxable and what remains non-taxable in different cases.
New Tax Regime Slabs for FY 2025-26
Under the new regime, income is taxed as per revised slabs, with a rebate for incomes up to ₹ 12 lakh. However, this rebate does not apply to special-rate incomes such as capital gains.
| Income Range (₹) | Tax Rate |
|---|---|
| Up to 4 lakh | Nil |
| 4 lakh – 8 lakh | 5% |
| 8 lakh – 12 lakh | 10% |
| 12 lakh – 16 lakh | 15% |
| 16 lakh – 20 lakh | 20% |
| Above 20 lakh | 25-30% |
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Taxation of Specific Income Sources
Each income type you mentioned is treated differently under the Income Tax Act:
| Income Source | Non-Taxable Limit | Tax Rate Beyond Limit |
|---|---|---|
| Short-Term Capital Gains (STCG) on Equity | No exemption | 20% (plus cess) |
| Long-Term Capital Gains (LTCG) on Equity | ₹ 1.25 lakh per FY | 12.5% (beyond exemption) |
| Dividends from Shares | Up to ₹ 4 lakh under slab (new regime) | Taxed as per slab rate |
| Bank Deposit Interest | Up to ₹ 4 lakh under slab (new regime) | Taxed as per slab rate |
Explanation of Key Terms
- STCG (Short-Term Capital Gain): Profit from selling equity shares or mutual funds held for 12 months or less. Now taxed at 20% irrespective of total income.
- LTCG (Long-Term Capital Gain): Profit from selling equity shares or mutual funds held for more than 12 months. The first ₹ 1.25 lakh of gains each year is exempt.
- Dividend Income: Profit distributed by companies from their earnings. Added to total income and taxed at normal slab rates.
- Interest Income: Earnings from bank fixed deposits or savings accounts. Taxed as “income from other sources”.
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Sample Scenarios
Let’s understand how much of your total income remains non-taxable depending on your mix of earnings:
| Scenario | Income Composition | Tax Implication |
|---|---|---|
| A | LTCG ₹ 1 L + Dividend ₹ 0.5 L + Interest ₹ 0.5 L | LTCG within exempt limit, other income within ₹ 4 L slab → No tax. |
| B | STCG ₹ 10 K + LTCG ₹ 50 K + Dividend ₹ 2 L + Interest ₹ 0.5 L | STCG taxed at 20% → ₹ 2 K approx. Rest non-taxable. |
| C | LTCG ₹ 5 L + Dividend ₹ 3 L + Interest ₹ 2 L | ₹ 1.25 L LTCG exempt, balance taxed @ 12.5%; other income taxed per slabs. |
Investor Takeaway
Indian-Share-Tips.com Nifty Expert Gulshan Khera, CFP®, who is also a SEBI Regd Investment Adviser, explains that even small capital-gain incomes are now taxed at special rates, removing the earlier ₹ 12 lakh rebate protection. Investors must plan the timing of share redemptions to stay within the ₹ 1.25 lakh LTCG exemption and use the ₹ 4 lakh zero-slab benefit for dividend and interest income efficiently.
Discover more investor-friendly tax insights at Indian-Share-Tips.com, which is a SEBI Registered Advisory Services.
Related Queries on Capital Gains Tax
- What Is the New LTCG Tax Rate on Equity in FY 2025-26?
- Can You Avoid Tax on Small STCG Amounts Under the New Regime?
- Are Dividends Still Tax-Free After Budget 2024?
SEBI Disclaimer: The information provided in this post is for informational purposes only and should not be construed as investment advice. Readers must perform their own due diligence and consult a registered investment advisor before making any investment decisions. The views expressed are general in nature and may not suit individual investment objectives or financial situations.
