If you are looking at your ITR portal summary and seeing a 20% tax rate applied to an income under ₹12 lakh, it can feel like a glitch. Under the modern New Tax Regime, your tax rate shouldn’t even touch 20% until your income crosses ₹16 lakh.

Thank you for reading this post, don't forget to subscribe!

In reality, the portal is doing exactly what it’s programmed to do. This sudden 20% calculation is almost always triggered by one of two specific scenarios: your tax regime choice or the type of income you earned.

You are filing under the Old Tax Regime

If you have explicitly opted into the Old Tax Regime (or forgot to switch to the New Regime, which is now the automatic default), you are subject to the legacy tax brackets. Under the Old Regime, the 20% bracket hits surprisingly early.

The Old Regime Brackets

• Up to ₹2.5 lakh: 0%
• ₹2.5 lakh to ₹5 lakh: 5%
• ₹5 lakh to ₹10 lakh: 20%
• Above ₹10 lakh: 30%

How the portal calculates it for a ₹11 Lakh income:

If your net taxable income (after standard deductions and deductions like 80C or 80D) is ₹11,00,000, the portal breaks down the tax sequentially:

Income Slab	Tax Rate	Calculated Tax Amount
First ₹2,50,000 (0 to 2.5L)	0%	₹0
Next ₹2,50,000 (2.5L to 5L)	5%	₹12,500
Next ₹5,00,000 (5L to 10L)	20%	₹1,00,000 (The 20% culprit)
Remaining ₹1,00,000 (10L to 11L)	30%	₹30,000
Total Base Tax		₹1,42,500 (+ 4% Cess)

You have “Special Rate” Income (e.g., Stock Market Profits)

Even if you are filing under the New Tax Regime—where the tax slabs for incomes below ₹12 lakh are normally just 5% or 10%—certain types of income bypass standard slabs completely. The portal pulls these out into a completely separate calculation.

The most common trigger for a flat 20% special rate is Short-Term Capital Gains (STCG) under Section 111A. This applies if you made profits selling listed equity shares or equity mutual funds held for less than one year.

How the portal calculates it:

If your total income is ₹11 lakh, but ₹1 lakh of that came from short-term stock trading profits, the portal splits your calculation into two separate buckets:

• The Special Bucket: The ₹1,00,000 trading profit is taxed at a flat 20% = ₹20,000.
• The Normal Bucket: The remaining ₹10,00,000 is processed under normal New Regime slabs (0% up to ₹4L, 5% from ₹4L–₹8L, and 10% from ₹8L–₹10L).

How to Check Your Return on the ITR Portal

To find out exactly why you are being hit with the 20% rate, navigate to your active filing draft and follow these steps:

1.Go to Tax Liability Summary

Scroll to the bottom of your ITR summary page and click on the final “Tax Liability Summary” tab.

2.Expand the Tax Computation

Click the small dropdown arrow next to the row labeled “Compute Income Tax” to expand the hidden line items.

3.Check for Special Rates

Look closely at the line item named “Tax at Special Rates”. If there is an amount listed there, click it. If it references Section 111A, your 20% tax is coming from short-term investment gains.

4.Verify Your Tax Regime

If “Tax at Special Rates” is zero, you are simply in the Old Tax Regime. Scroll back to the profile/regime selection page and change your selection to the New Regime. For incomes up to ₹12 lakh, switching will trigger the Section 87A rebate and likely bring your effective tax down significantly.

Editing by CA- Devendra saini