The Indian government has overhauled the capital gains taxation framework, with new rates and holding period definitions coming into effect from July 23, 2024. These changes, announced in the 2024 Union Budget, aim to simplify the tax structure and promote long-term investments.
Key Changes in Capital Gains Taxation
1. Revised Tax Rates:
Long-Term Capital Gains (LTCG): A uniform tax rate of 12.5% is now applicable to LTCG across various asset classes, including equities, mutual funds, real estate, and unlisted shares. This is an increase from the previous 10% rate.
Short-Term Capital Gains (STCG): STCG on listed securities, such as equities and equity-oriented mutual funds, will be taxed at 20%, up from the earlier rate of 15%.
2. Standardization of Holding Periods:
To determine whether a capital gain is short-term or long-term, the holding periods have been standardized:
Listed Financial Assets (e.g., equities, REITs): Assets held for more than 12 months are considered long-term.
Unlisted Financial Assets and Non-Financial Assets (e.g., unlisted shares, real estate): Assets held for more than 24 months are considered long-term.
Asset-Wise Taxation Details
| Asset Type | LTCG Tax Rate | STCG Tax Rate | Holding Period for LTCG |
| Listed Equities & Equity MFs | 12.5% (with ₹1.25 lakh exemption) | 20% | 12 months |
| Debt Mutual Funds | Slab Rate | Slab Rate | Not Applicable |
| International Funds, Gold ETFs | 12.5% | Slab Rate | 12 months |
| Real Estate, Unlisted Shares | 12.5% | Slab Rate | 24 months |
Note: STCG on most non-equity assets continues to be taxed as per applicable income tax slabs.
Additional Considerations
No Deductions: Standard deductions under sections like 80C and 80D are not applicable against capital gains.
Tax Harvesting Strategy: Investors can utilize tax harvesting by selling equities to realize gains up to the exemption limit before March 31, 2025, and repurchasing them thereafter to reset the acquisition cost.
Increased Securities Transaction Tax (STT): The STT on futures trading has been increased to 0.02%, and on options trading to 0.1%, effective from October 2024.
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