Budget 2024: Major changes brought about in LTCG & STCG

by Taxchanakya July 25, 2024

written by Taxchanakya July 25, 2024 0 comment

The Union Budget 2024 introduced significant modifications to the taxation of capital gains in India. Finance Minister has proposed a uniform long-term capital gains (LTCG) tax rate of 12.5% across all asset classes, eliminating the previous tax structure. However, the benefit of indexation, which allowed taxpayers to adjust the purchase price of an asset for inflation, has been removed for all assets, but the indexation benefit has been retained for properties bought or inherited before 2001.

Indexation is a method used to adjust the purchase price of all assets for inflation over the years. This adjusted price is then used to calculate capital gains. Now, w.e.f. 1st Oct 2024, Indexation benefit will not be available to the assessee.

Additionally, the holding period for determining whether a capital gain is short-term or long-term has been revised. Listed securities will now be considered long-term after 12 months, while other assets require a holding period of 24 months.

Key changes in Capital Gain Tax is as per below mentioned table:

The tax rate for short-term capital gains on equity-related investments has been increased from 15% to 20%. While the tax-free limit for long-term capital gains on equity-related investments has been raised from Rs. 1 lakh to Rs. 1.25 lakh, with removal of indexation benefit while calculating Long Term Capital Gain on equity related investments too.

Finance Minister declared changes in holding period in Budget 2024, for determining whether capital gains are short-term or long-term. Now its 12 months for listed securities and 24 months for all other assets. Shares listed on stock exchanges, including units of listed business trusts, will be considered long-term after holding for 12 months.

All other assets, including unlisted shares, immovable property, bonds, debentures, and gold, will be considered long-term after holding for 24 months. Earlier the holding period for bonds, debentures, and gold was 36 months.

The tax rate for short-term capital gains on equity-related investments (like stocks, equity mutual funds, and business trust units) has been increased from 15% to 20%. Short-term capital gains on assets other than equity-related investments will continue to be taxed at the applicable income tax slab rate.

Budget 2024 has introduced a flat 12.5% tax rate for all types of long-term capital gains, regardless of the asset class.

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Budget 2024: Major changes brought about in LTCG & STCG

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