There have been a lot of changes in this year’s Union Budget.If you want to understand all the new changes that took place in the new budget, especially in the case of Long Term Capital Gains, then we have got your back.
In this article, we will look into the different asset classes such as real estate, equity shares, mutual funds, etc., and the tax that you have to currently pay on these assets and the tax that you paid earlier.
Related article: Bachao Humhe – Tax se !!!
WHAT ARE CAPITAL GAINS AND LTCG TAX?
Capital gains arise when capital assets are sold for a profit or gain. These gains are taxable as per the Income Tax Act of India.
Long-Term Capital Gains Tax (LTCG) is a tax imposed on capital gains from the sale of capital assets after a certain duration, as mentioned in the Income Tax Act. It is levied on all asset classes such as equities, debt, gold and real estate.
But first, let’s learn about the recent updates as per the Budget.
- Starting from FY 24-25, there will be just two holding periods: 12 months and 24 months. All listed securities will have a holding period of 12 months. All other assets will have a holding period of 24 months.
- Starting FY 24-25, the annual exemption limit for LongTerm Capital Gains on equity shares, equity-oriented units, or Business Trust units will rise from ₹1 lakh to ₹1.25 lakh. The tax rate also increases from 10% to 12.5%.
- For any other financial/non-financial assets held by you, the rate of tax on LTCGs is 12.5%.
- For land and buildings, any sale made after July 23, 2024, will have a tax rate of 12.5% with no indexation benefits. Alternatively, the option of paying 20% tax with indexation benefit is available if the asset was acquired before July 31, 2024.
GRANDFATHERING PROVISION FOR LAND AND BUILDING
The Finance Bill 2024 proposes a grandfathering provision for long-term capital gains to be applicable on the sale of land and buildings acquired before July 23, 2024.
Under this, the tax payable on LTCG will be the lower of either 12.5% without indexation (new law) or 20% with indexation (old law). Any excess tax under the new law over the old law (with indexation) will be disregarded.
However, non-residents, companies, partnership firms, and LLPs cannot avail of grandfathering benefits for property acquired before July 23, 2024. Indexation benefits are not available for them.
LTCG Tax for Different Assets
Now, let’s talk about different capital assets’ tax rates and holding periods for them to be considered as long-term capital gains.
Listed equity shares & Equity-oriented mutual funds
- Holding period: More than 12 months
- Tax rate: 12.5%
- Indexation benefit: Not available
- Exemptions: Up to ₹1.25 lakhs per FY
Movable assets such as paintings, jewelry, etc..
- Holding period: More than 24
months - Tax rate: 12.5%
- Indexation benefit: Removed
Unlisted equity shares
- Holding period: More than 24
months - Tax rate: 12.5% with no indexation
benefit
Business Trust Units
- Holding period: More than 12 months
- Tax rate: 12.5%
- Indexation benefit: Not available
Listed bonds, debentures, and fixed-income instruments
- Holding period: More than 12 months
- Tax rate: 12.5%
- Indexation benefit: Removed
Unlisted Bonds
- Holding period: Not applicable
- Tax rate: As per income slab
- Indexation benefit: Not applicable
Gold/Silver ETFs
- Holding period: 12 months
- Tax rate: 12.5%
- Indexation benefit: Not applicable
Physical Gold
- Holding period: 24 months
- Tax rate: 12.5%
- Indexation benefit: Not applicable
Prasad Iyer
[Certified Financial Planner – CFP CM]
