Investors in India must pay careful attention to the recent changes in capital gains taxation effective from July 23, 2024. The Union Budget 2024 introduced new rates and rules for both short-term and long-term capital gains across all major asset classes, like shares, mutual funds, real estate, and bonds. Here’s a detailed look at what has changed, alongside practical examples.
Capital Gains Tax Rates: Quick Overview
| Asset Type | STCG (Before 23 Jul 2024) | STCG (After 23 Jul 2024) | LTCG (Before 23 Jul 2024) | LTCG (After 23 Jul 2024) |
| Listed Equity Shares, Equity Mutual Funds (STT paid) | 15% | 20% | 10% (above ₹1 lakh, no indexation) | 12.5% (above ₹1.25 lakh, no indexation) |
| Unlisted Shares, Bonds, Debt Funds | Slab/15%/20% | Slab/20%/12.5% | 20% (with indexation) | 12.5% (no indexation) |
| Real Estate (Land/Building) | Slab rate (STCG) | Slab rate (STCG) | 20% (with indexation) | 12.5% (no indexation)* |
*For properties acquired before July 23, 2024, the taxpayer can choose between 20% with indexation or 12.5% without indexation.
What Changed from July 23, 2024?
Short-Term Capital Gains (STCG):
- For listed equity securities and equity mutual funds (with STT), the tax rate increased from 15% to 20% for sales on or after July 23, 2024.
- For other assets, STCG continues to be taxed as per individual tax slab rates.
Long-Term Capital Gains (LTCG):
- For listed equity shares and equity mutual funds (with STT), the tax rate increased from 10% for gains over ₹1 lakh to 12.5% for gains over ₹1.25 lakh.
- For real estate, the LTCG rate is now 12.5% (without indexation) for assets sold after July 23, 2024. However, if the property was acquired before that date, the individual can choose between 20% with indexation (old rule) or 12.5% without indexation (new rule).
- Exemption Limit: The basic exemption limit for LTCG from listed shares and mutual funds increased from ₹1 lakh to ₹1.25 lakh.
- Indexation Benefit: Except for specific cases of real estate bought before July 23, 2024, the indexation benefit is removed for most assets.
Examples to Illustrate the Changes
Example 1: Equity Mutual Funds
Scenario 1: Sold before July 23, 2024
- Invested ₹5 lakh in an equity mutual fund.
- Sold after 13 months for ₹8 lakh (LTCG = ₹3 lakh).
- Tax calculation:
Exemption: ₹1 lakh.
Taxable LTCG: ₹2 lakh.
LTCG Tax: 10% of ₹2 lakh = ₹20,000.
Scenario 2: Sold after July 23, 2024
- Same as above, but sale is after July 23, 2024.
- Exemption: ₹1.25 lakh.
- Taxable LTCG: ₹1.75 lakh.
- LTCG Tax: 12.5% of ₹1.75 lakh = ₹21,875.[2][5][6]
Example 2: Residential Property
Scenario 1: Sold before July 23, 2024
- Buy price (March 2012): ₹50 lakh.
- Sale price (August 2024): ₹1.5 crore.
- Indexed cost: ₹50 lakh × (CII 2024 / CII 2012) = ₹1 crore (assume indexation factor = 2.0).
- LTCG: ₹1.5 crore – ₹1 crore = ₹50 lakh.
- LTCG Tax: 20% of ₹50 lakh = ₹10 lakh.
Scenario 2: Sold after July 23, 2024 (property acquired before July 23, 2024)
- Seller can choose:
- a) 20% on indexed gains as above = ₹10 lakh,
- OR
- b) 12.5% of ₹1 crore (simple gain, no indexation) = ₹12.5 lakh.
- Seller should opt for whichever is lower.
Example 3: Short-Term Trading in Shares
Bought and sold within 10 months
- Sale before July 23, 2024: STCG taxed at 15%.
- Sale after July 23, 2024: STCG taxed at 20%.
Classification of Short term and Long term Capital Gains
| Asset Type | Holding Period to be classified as Short-Term Capital Asset (STCA) | Holding Period to be classified as Long-Term Capital Asset (LTCA) |
| Listed Equity Shares, Equity Mutual Funds (STT paid) | 12 months or less | More than 12 months |
| Real Estate (Land/Building) | 24 months or less | More than 24 months |
| Unlisted Shares | 24 months or less | More than 24 months |
| Bonds (other than Zero Coupon Bonds) | 12 months or less (if listed) OR 24 months or less (if unlisted) | More than 12 months (if listed) OR More than 24 months (if unlisted) |
| Debt Funds (purchased on or after April 1, 2023) | Any period of holding (All gains are treated as Short-Term Capital Gains, taxed at slab rates, with no LTCG benefit) | Not applicable (No Long-Term Capital Asset classification after this date) |
| Debt Funds (purchased before April 1, 2023) | 24 months or less (Note: Previously 36 months, but a holding period of more than 24 months qualified for a beneficial LTCG rate of 12.5% without indexation for transfers on or after July 23, 2024.) | More than 24 months (Note: Previously 36 months, now >24 months qualifies for LTCG for transfers on or after July 23, 2024). |
