Understanding the New Capital Gains Tax in India (FY 2024-25 / AY 2025-26): Rates, Rules & Impact
- Nimisha Panda
- Jul 22
- 19 min read
The landscape of new capital gain tax in India has seen important adjustments. These changes became effective from July 23, 2024, following the Finance (No. 2) Act, 2024. It's noteworthy that the Union Budget 2025 did not introduce further alterations to these specific capital gains rules. This article will guide Indian taxpayers through the updated capital gains tax India framework for FY 2024-25 (which corresponds to AY 2025-26). Readers will learn about the latest capital gains tax rules, including new tax rates, revised holding periods for assets, and the significant shifts in indexation benefits. Understanding these elements is crucial for accurate tax filing and financial planning for capital gains AY 2025-26. TaxBuddy, with its expertise in tax advisory, aims to simplify these complex changes for you. For a broader understanding of your tax duties, consider looking into comprehensive tax planning or Understanding your income tax obligations. You can refer to the Finance (No. 2) Act, 2024 for detailed legal text.
Key Takeaways / What's New?
Effective Date: Major changes to capital gains tax apply from July 23, 2024.
Holding Periods: Simplified to 1 year for listed securities and 2 years for most other assets to qualify as long-term.
LTCG Rates: Generally, a 12.5% tax rate on LTCG for most assets, with no indexation benefit.
LTCG on Equity: Exemption for LTCG on listed equities/equity MFs (Sec 112A) increased to ₹1.25 lakh.
STCG on Equity: Rate for STCG on STT-paid listed equities/equity MFs (Sec 111A) increased to 20%.
Indexation: Largely removed, but an option exists for land/buildings acquired before July 23, 2024.
Share Buyback: Taxed as dividend income for shareholders from October 1, 2024.
ITR Filing: Deadline for AY 2025-26 extended to September 15, 2025, with updated forms.
Table of Content
What is Capital Gains Tax in India?
What is capital gains tax is a common question for many taxpayers. Capital gains tax in India is a tax you pay on the profit, or 'gain', you make from selling a 'capital asset'. A capital asset, as per the Income Tax Act, typically includes property, stocks, bonds, gold, and mutual funds. For a detailed understanding of defining capital assets, you might find TaxBuddy's resources helpful. The Income Tax Act, 1961, governs these taxes.
There are mainly two types of capital gains: Short-Term Capital Gains (STCG) and Long-Term Capital Gains (LTCG). STCG India arises if you sell an asset after holding it for a relatively short period. Conversely, LTCG India occurs if you sell an asset after holding it for a longer duration. The specific holding period that differentiates STCG from LTCG can vary depending on the asset type and the latest rules, which we will explore. This foundational knowledge is important before we delve into the new regulations. The Income Tax Department of India website provides comprehensive information on tax laws.
Key Changes to Capital Gains Tax Effective July 23, 2024
The capital gains tax changes 2024 represent a significant overhaul aimed at rationalizing and simplifying the tax structure. The Finance (No. 2) Act, 2024, introduced these new tax rules July 2024, which came into effect on July 23, 2024. These capital gains budget 2024 highlights (stemming from the Finance Act, not a separate budget announcement for these specific changes) primarily affect three main areas for taxpayers.
The key reform parameters under the Finance (No. 2) Act, 2024, focus on:
Holding Period: The duration for which an asset must be held to qualify for long-term capital gains treatment has been revised for certain assets.
Tax Rates: New tax rates for both Short-Term Capital Gains (STCG) and Long-Term Capital Gains (LTCG) have been introduced for various asset classes.
Indexation Benefit: The availability of the indexation benefit, which accounts for inflation when calculating LTCG, has been significantly altered.
These changes, effective from the specified date, necessitate a fresh look at how capital gains will be calculated and taxed. You can check the Finance (No. 2) Act, 2024 details for specific clauses.
Understanding the New Holding Periods for Capital Assets
The holding period for capital gains has been simplified for assets transferred on or after July 23, 2024. For listed securities, such as equity shares and equity-oriented mutual funds, the holding period to qualify for Long-Term Capital Gains (LTCG) remains at more than 12 months. This also now applies to units of Business Trusts like Real Estate Investment Trusts (ReITs) and Infrastructure Investment Trusts (InVITs), which previously required a holding period of over 36 months for LTCG. For understanding more about investing in listed shares or the tax on property sale.
A LTCG holding period 2024 of more than 24 months now applies to most other assets for them to be considered long-term. This includes unlisted shares (no change from previous rules for this specific asset), immovable property (like land or buildings – also no change), gold, and most debt instruments. The new holding period property rules maintain the 24-month threshold for LTCG. For assets like gold and unlisted securities (other than shares), this is a reduction from the previous 36-month requirement. Debt mutual funds (not predominantly equity-focused) also fall under the "greater than 24 months" category for LTCG, unless they are covered by the special provisions of Section 50AA where gains are treated as STCG regardless of holding period (applicable for investments from April 1, 2023). The STCG holding period shares (listed) would be 12 months or less.
Here’s a summary of the holding periods for LTCG effective for transfers on or after July 23, 2024:
Asset Type | Holding Period for LTCG (Post-July 23, 2024) | Previous Holding Period (if different) |
Listed Equity Shares/Equity MFs | > 12 months | No change |
Units of Business Trusts (ReITs/InVITs) | > 12 months | > 36 months |
Unlisted Shares | > 24 months | No change |
Immovable Property | > 24 months | No change |
Gold, Unlisted Securities (other than shares) | > 24 months | > 36 months |
Debt MFs (not predominantly equity) | > 24 months (if not Sec 50AA) | > 36 months / Special rule if after Apr 1, 2023 |
New Long-Term Capital Gains (LTCG) Tax Rates & Rules (AY 2025-26)
The new LTCG tax rate structure marks a general shift towards a 12.5% LTCG rate for most assets when transferred on or after July 23, 2024, notably without the benefit of indexation. This is a pivotal change. For LTCG on shares after July 2024, specifically listed equity shares and equity-oriented mutual funds covered under Section 112A, the tax rate is 12.5% on gains exceeding an increased exemption limit of ₹1.25 lakh. The capital gains tax section 112A continues to apply here, but with the new LTCG 12.5% rate and the enhanced threshold.
The removal of indexation for most assets alongside this rate modification is a significant aspect of the new rules. This means the historical cost of acquisition will not be adjusted for inflation for calculating gains on most assets, which could have a considerable impact depending on how long an asset was held.
Here's how LTCG rates generally apply for transfers on or after July 23, 2024:
Listed Equity Shares & Equity-Oriented Mutual Funds (Sec 112A): 12.5% on gains over ₹1.25 lakh (without indexation).
Other Capital Assets (General Rule): 12.5% on gains (without indexation).
Special Case for Land/Building: An option exists for resident individuals/HUFs for assets acquired before July 23, 2024 (detailed in the next section).
Example Calculation for LTCG on shares (Sec 112A): Suppose you have LTCG of ₹2,00,000 from listed shares. Exemption: ₹1,25,000 Taxable LTCG: ₹2,00,000 - ₹1,25,000 = ₹75,000 Tax Payable: 12.5% of ₹75,000 = ₹9,375 (plus applicable cess).
The Indexation Dilemma: Understanding its Removal and Special Cases
The indexation benefit removed capital gains is a major talking point for transfers from July 23, 2024. Previously, for LTCG calculation, indexation allowed taxpayers to adjust the cost of acquiring an asset upwards using the government-notified Cost Inflation Index (CII). This effectively reduced the taxable profit by accounting for inflation over the holding period. For instance, if you wanted to know how indexation previously worked, you could refer to older tax guides. The general removal of this benefit simplifies calculations but may increase the taxable gain amount for assets held for many years. The government's rationale, as often stated, is simplification paired with a moderated tax rate.
The impact of no indexation means that for most assets, the capital gain will simply be the sale price minus the original cost of acquisition (and any improvement/transfer costs). While the LTCG rate is set at 12.5% for many assets, the absence of indexation might, in some cases, nullify the benefit of a seemingly lower tax rate, especially for assets that have appreciated significantly due to inflation over a long period.
What is Indexation? Indexation is a process used to adjust the purchase price of an asset for inflation. It increases the cost base of the asset, thereby reducing the apparent capital gain when the asset is sold.
What is the Cost Inflation Index (CII)? CII is an index notified by the Central Government every year. It is used to calculate the indexed cost of acquisition and improvement of a capital asset for LTCG purposes.
Crucial Option for Land & Building: 12.5% (No Indexation) vs. 20% (With Indexation)
A crucial option for LTCG on property new rules exists for resident individuals and Hindu Undivided Families (HUFs). This option applies to Long-Term Capital Gains arising from the sale of land and/or buildings (immovable property) that were acquired before July 23, 2024, and are transferred on or after this date. These taxpayers can choose the lower of the tax computed using two methods for their capital gains tax land sale India:
Tax at 12.5% on the LTCG calculated without the indexation benefit.
Tax at 20% on the LTCG calculated with the indexation benefit.
This 12.5% vs 20% capital gains choice allows taxpayers to select the more beneficial tax outcome based on their specific situation. The property tax with indexation option becomes particularly relevant for properties held for a very long time, where the indexed cost of acquisition could be substantially higher than the original cost.
When might 12.5% (no indexation) be better? If the property was acquired relatively recently (but still qualifies as long-term, i.e., held for >24 months) before July 23, 2024, the benefit from indexation might be minimal. In such cases, the straightforward 12.5% tax rate on the non-indexed gain could result in a lower tax outgo.
When might 20% (with indexation) be better? If the property was acquired many years ago, the cumulative effect of inflation (and thus the indexation benefit) could be very significant. Applying indexation might inflate the cost of acquisition to such an extent that the resulting LTCG, even when taxed at 20%, is lower than the tax calculated at 12.5% on a much larger non-indexed gain.
It is vital to perform calculations for both scenarios. Consulting a tax advisor, like TaxBuddy for expert advice on property capital gains, is highly recommended to determine the optimal choice.
Calculate LTCG without indexation. Tax = 12.5% of this gain (Tax A).
Calculate LTCG with indexation. Tax = 20% of this gain (Tax B).
Compare Tax A and Tax B. Pay the lower amount.
New Short-Term Capital Gains (STCG) Tax Rates & Rules (AY 2025-26)
There's a significant update to the new STCG tax rate, particularly under Section 111A. For short-term capital gains arising from the sale of STT (Securities Transaction Tax) paid listed equity shares, units of equity-oriented mutual funds, and units of business trusts, the tax rate has increased to 20% (up from the previous 15%). This STCG on shares 20% rate under section 111A new rate is applicable for transactions made on or after July 23, 2024.
For other types of short-term capital gains, the rules remain largely consistent. For example, STCG from assets like debt mutual funds (if classified as short-term due to holding period or under Section 50AA), property held for less than 24 months, or unlisted shares held for less than 24 months, are added to your total income and taxed at the applicable short term capital gains tax slab rates. You can refer to TaxBuddy for information on current income tax slab rates.
Here’s a table summarizing the STCG tax rates post-July 23, 2024:
Asset Type (Short-Term) | New STCG Tax Rate (Post-July 23, 2024) | Previous STCG Rate |
Listed Equity Shares/Eq. MFs (STT paid) | 20% (Sec 111A) | 15% (Sec 111A) |
Units of Business Trusts (STT paid) | 20% (Sec 111A) | 15% (Sec 111A) |
Debt MFs (Short-term by holding or Sec 50AA) | Slab Rates | Slab Rates |
Property (held <24m) | Slab Rates | Slab Rates |
Unlisted Shares (held <24m) | Slab Rates | Slab Rates |
Other STCG (not covered by Sec 111A) | Slab Rates | Slab Rates |
Special Focus: Taxation of Mutual Funds Under the New Regime
The mutual fund taxation new rules require careful attention due to varied treatments. For Equity-Oriented Mutual Funds, if held for more than 12 months (LTCG), the gains exceeding ₹1.25 lakh are taxed at 12.5% under Section 112A (without indexation), effective for transfers from July 23, 2024. If held for 12 months or less (STCG), the gains are taxed at 20% under Section 111A (also effective from July 23, 2024). This means STCG equity mutual funds 20% is the new rate.
Regarding LTCG debt mutual funds 2024, the scenario is more complex. For investments made in debt mutual funds from April 1, 2023, where the fund's domestic equity holding does not exceed 35%, any capital gains are treated as Short-Term Capital Gains (STCG) and taxed at the individual's applicable slab rates. This is due to Section 50AA, and this treatment as STCG applies irrespective of the actual holding period. So, the concept of LTCG for such debt funds (invested post-April 1, 2023) is effectively removed by section 50AA mutual funds.
For other types of mutual funds, such as Gold Mutual Funds or International Mutual Funds (that are not equity-oriented as per Indian tax laws), the general new rules apply. If held for more than 24 months (LTCG), gains are taxed at 12.5% without indexation. If held for less than 24 months (STCG), gains are taxed at slab rates. It's always good practice for understanding mutual fund investments and their tax implications.
Mutual Fund Type | Holding Period | Classification | Tax Rate (Post-July 23, 2024, unless specified) | Indexation |
Equity-Oriented MFs | > 12 months | LTCG (Sec 112A) | 12.5% on gains > ₹1.25 lakh | No |
Equity-Oriented MFs | ≤ 12 months | STCG (Sec 111A) | 20% | N/A |
Debt MFs (Equity <35%, Invested from Apr 1, 2023) | Any | STCG (Sec 50AA) | Slab Rates | N/A |
Other MFs (e.g., Gold, Intl - not equity-oriented) | > 24 months | LTCG | 12.5% | No |
Other MFs (e.g., Gold, Intl - not equity-oriented) | ≤ 24 months | STCG | Slab Rates | N/A |
Impact on Other Asset Classes
The new capital gain tax rules also affect other common investments. For Gold (Physical, Gold ETFs, Gold Mutual Funds), the capital gains on gold new rules mean if held for more than 24 months (LTCG), gains are taxed at 12.5% without indexation. If held for less than 24 months (STCG), gains are added to income and taxed at slab rates. The taxation of Sovereign Gold Bonds (SGBs) has specific nuances. Interest on SGBs is taxable. However, capital gains on redemption of SGBs for individuals are generally exempt. If SGBs are sold in the secondary market before maturity, LTCG (if held >12 months, as they are listed) would be taxed at 12.5% without indexation (post July 23, 2024 changes), and STCG would be at slab rates. (Original SGB rules regarding redemption benefits remain, this new rate applies to secondary market LTCG).
For Bonds and Debentures (Listed/Unlisted), the treatment aligns with other securities. If listed and STT is paid, LTCG (held >12 months) is taxed at 12.5%. If unlisted, or listed but STT not paid, the holding period for LTCG is >24 months, with the gain taxed at 12.5%. STCG will be taxed at 20% if Section 111A applies (e.g., listed bonds where STT is paid and conditions met for STCG), otherwise at slab rates. Market-Linked Debentures (MLDs) have a distinct rule: gains from MLDs are generally taxed at normal slab rates, irrespective of the holding period, often treated similarly to interest income or STCG by characterization.
Regarding Virtual Digital Assets (VDAs) / Crypto, the crypto tax India new rules established earlier remain largely unchanged by this specific July 2024 capital gains overhaul for other assets. Gains from VDAs are taxed at a flat rate of 30%. No deduction for any expenditure (other than the cost of acquisition) is allowed. Losses from VDAs cannot be set off against any other income, nor can they be carried forward.
Gold (Physical, ETFs, Gold MFs):
LTCG (>24m): 12.5% (no indexation)
STCG (≤24m): Slab rates
Sovereign Gold Bonds (SGBs):
Interest: Taxable at slab rates
Redemption by Individual: Capital gains exempt
Sale in Secondary Market (LTCG >12m): 12.5% (no indexation)
Sale in Secondary Market (STCG ≤12m): Slab rates
Bonds & Debentures
LTCG (Listed, STT paid, >12m OR Unlisted/No STT >24m): 12.5% (no indexation)
STCG (Sec 111A if applicable): 20%
Other STCG / MLDs: Slab rates
Virtual Digital Assets (Crypto)
Gains: Flat 30% tax
No deductions (except cost of acquisition)
No set-off of losses.
Changes in Share Buyback Taxation (Effective Oct 1, 2024)
The new share buyback tax rules introduce a significant shift in how buybacks are taxed. Effective from October 1, 2024, the proceeds received by shareholders from the buyback of shares by a company will be treated as dividend income from buyback. Consequently, this income will be taxed in the hands of the shareholders at their applicable slab rates.
This changes the previous system where the company undertaking the buyback was liable to pay a buyback tax (additional income tax) on the distributed income. Now, the incidence of tax moves from the company to the shareholder.
Before Oct 1, 2024: Company pays buyback tax on distributed income. Income is generally exempt in the hands of the shareholder. On or After Oct 1, 2024: Proceeds from buyback taxed as dividend income in the hands of the shareholder at their individual slab rates. Company does not pay the specific buyback tax.
How to Calculate New Capital Gains Tax: Examples
To calculate new capital gains tax India, one needs to consider the sale consideration, cost of acquisition, cost of improvement (if any), and transfer expenses, along with the new rates and rules.
Example 1: LTCG on Listed Shares (Gain > ₹1.25 lakh)
An individual sells listed equity shares (STT paid) on August 15, 2024, after holding them for 18 months.
Sale Consideration: ₹5,00,000
Cost of Acquisition: ₹2,00,000
Transfer Expenses (e.g., brokerage): ₹5,000
Full Value of Consideration: ₹5,00,000
Less: Expenses on Transfer: ₹5,000
Net Consideration: ₹4,95,000
Less: Cost of Acquisition: ₹2,00,000 (Indexation not applicable under Sec 112A new regime)
Long-Term Capital Gain (LTCG): ₹2,95,000
Less: Exemption under Sec 112A: ₹1,25,000
Taxable LTCG: ₹1,70,000
Tax @ 12.5%: ₹1,70,000 * 12.5% = ₹21,250 (plus applicable cess)
Example 2: STCG on Listed Shares
An individual sells listed equity shares (STT paid) on September 1, 2024, after holding them for 6 months.
Sale Consideration: ₹1,50,000
Cost of Acquisition: ₹1,00,000
Transfer Expenses: ₹2,000
Full Value of Consideration: ₹1,50,000
Less: Expenses on Transfer: ₹2,000
Net Consideration: ₹1,48,000
Less: Cost of Acquisition: ₹1,00,000
Short-Term Capital Gain (STCG): ₹48,000
Tax @ 20% (Sec 111A new rate): ₹48,000 * 20% = ₹9,600 (plus applicable cess)
Example 3: LTCG on Property (Illustrating 12.5% vs. 20% Option)
A resident individual sells a house plot on October 10, 2024. The plot was acquired on May 5, 2010.
Sale Consideration: ₹80,00,000
Cost of Acquisition (May 2010): ₹10,00,000
Transfer Expenses: ₹50,000
Cost Inflation Index (Hypothetical): FY 2010-11 = 167; FY 2024-25 = 410 (Illustrative CII values)
Option 1: Tax at 12.5% (Without Indexation)
Net Consideration: ₹80,00,000 - ₹50,000 = ₹79,50,000
LTCG: ₹79,50,000 - ₹10,00,000 = ₹69,50,000
Tax @ 12.5%: ₹69,50,000 12.5% = *₹8,68,750
Option 2: Tax at 20% (With Indexation)
Net Consideration: ₹79,50,000
Indexed Cost of Acquisition: ₹10,00,000 * (410 / 167) = ₹24,55,090 (approx.)
LTCG: ₹79,50,000 - ₹24,55,090 = ₹54,94,910
Tax @ 20%: ₹54,94,910 20% = *₹10,98,982
In this LTCG calculation example 2024 for property, Option 1 (12.5% without indexation) results in lower tax. The taxpayer would choose this.
Example 4: Capital Gains on Debt MFs (Post-April 2023 Investment)
An individual redeems units of a Debt Mutual Fund (equity holding 35%) on November 20, 2024. These units were purchased on June 1, 2023.
Sale Consideration: ₹2,50,000
Cost of Acquisition: ₹2,20,000
Since investment was made after April 1, 2023, and it's a specified debt fund, gains are STCG (Sec 50AA).
Capital Gain: ₹2,50,000 - ₹2,20,000 = ₹30,000
Tax: This ₹30,000 will be added to the individual's total income and taxed at their applicable slab rate.
These examples are illustrative; actual calculations may involve more factors.
Saving Capital Gains Tax: Exemptions Under the New Regime (Sections 54, 54F, 54EC, etc.)
Good news for taxpayers is that most rollover benefits and capital gains tax exemptions India generally continue under the new regime. To save capital gains on property sale or other assets, popular exemptions like Section 54 (for reinvestment of LTCG from a residential property into another residential property), Section 54F (for reinvestment of LTCG from assets other than a house property into a residential house), and section 54EC bonds new rules (investment in specified bonds like those of NHAI, REC) remain available. TaxBuddy has guides on tax-saving investments and planning under Section 54.
It's important to note any existing caps or conditions. For instance, a ₹10 crore cap on the deduction under Section 54 and Section 54F was introduced from AY 2024-25 (i.e., for transactions in FY 2023-24 onwards). This cap continues to apply. The conditions for these exemptions, including timelines for reinvestment and usage of the Capital Gains Account Scheme (CGAS) if applicable, must be strictly followed. TaxBuddy can help you plan your investments to maximize tax savings.
Here’s a summary of key exemptions:
Section | Exemption For | Investment To Be Made In | Key Conditions/Time Limits (Illustrative) |
54 | LTCG from Residential Property | Another Residential Property (in India) | Purchase 1 year before or 2 years after sale; OR construct within 3 years. Max deduction ₹10 Cr. Option for 2 houses if LTCG ≤ ₹2 Cr (once in lifetime). |
54F | LTCG from Asset other than Residential Property | Residential Property (in India) | Purchase 1 year before or 2 years after sale; OR construct within 3 years. Should not own >1 residential house on date of transfer (other than new one). Max deduction ₹10 Cr. |
54EC | LTCG from Land/Building/Both | Specified Bonds (NHAI, REC etc.) | Invest within 6 months of sale. Max investment ₹50 Lakh per FY. Bonds have a 5-year lock-in. |
Reporting New Capital Gains in ITR for AY 2025-26
For ITR filing capital gains AY 2025-26, the ITR forms issued by the CBDT have been updated to incorporate the new capital gains tax rules. This means taxpayers will need to carefully segregate and report transactions that occurred before July 23, 2024 (old rules apply) and those on or after July 23, 2024 (new rules apply). Knowing how to report new capital gains in ITR accurately is essential. The ITR form changes capital gains will likely include specific schedules or columns to capture this bifurcation. The good news is that the ITR filing deadline for AY 2025-26 has been extended to September 15, 2025.
Correctly reporting these gains, especially with the new holding periods, rates, and the option for land/building sales, is crucial to avoid discrepancies and potential notices from the tax department. For example, ITR-2 or ITR-3 forms are typically used by individuals and HUFs who have capital gains income. Ensure accurate ITR filing with TaxBuddy's File your ITR with TaxBuddy expert assistance. You can access the official income tax e-filing portal for filing.
Key reporting aspects:
Use updated ITR forms for AY 2025-26.
Differentiate transactions based on the July 23, 2024, cut-off date.
Carefully calculate gains as per new rates and indexation rules (or lack thereof).
If claiming the land/building option, ensure calculations for both methods are maintained.
Report exemptions claimed under relevant sections accurately.
Impact of New Capital Gain Tax Rules on NRIs
The NRI capital gains tax India new rules generally mean that Non-Resident Indians (NRIs) are also subject to these updated general capital gains tax provisions, including the revised rates and holding periods effective from July 23, 2024. For example, LTCG for NRI after July 2024 on Indian listed shares would generally be 12.5% (on gains over ₹1.25 lakh, Sec 112A), similar to residents.
However, specific considerations for NRIs remain vital. Tax Deducted at Source (TDS) is a significant aspect of TDS on capital gains for NRI. The payer (buyer) is usually responsible for deducting TDS at applicable rates when making payment to an NRI for capital assets. Furthermore, NRIs should always evaluate the provisions of any applicable Double Taxation Avoidance Agreement (DTAA) between India and their country of residence, which might offer more beneficial tax treatment or credit for taxes paid. Given the complexities, NRIs should consider that DTAA benefits might influence the final tax liability. TaxBuddy offers TaxBuddy's NRI Tax Services for specialized guidance. [Found NRI in general plans (22), specific link if available is better, otherwise use general advisory]
Key considerations for NRIs:
General new rates (e.g., 12.5% LTCG, 20% STCG on listed equity) apply.
Holding periods are as per the new rules.
TDS provisions under Section 195 of the Income Tax Act are critical.
DTAA benefits must be evaluated.
The option for land/building (12.5% no indexation vs 20% with indexation) would also generally be available if other conditions for residents are met by the NRI (e.g. property acquired before July 23, 2024), subject to specific DTAA clauses.
Conclusion: Navigating the New Capital Gains Tax Landscape
In summary, understanding new capital gains tax rules effective July 23, 2024, is essential for all Indian taxpayers, including NRIs. The main shifts involve a more unified LTCG rate (often 12.5% without indexation for many assets), an increased STCG rate for specified assets like listed equities (to 20%), significant changes to indexation benefits (largely removed with a key option for land/buildings), and revisions to holding periods for classifying assets as long-term or short-term. These changes necessitate careful tax planning capital gains.
Ensuring capital gains compliance India under this new framework is crucial. The effective date of July 23, 2024, is the pivot point for applying these new provisions for FY 2024-25 (AY 2025-26). Stay informed and compliant. For personalized advice on how these new capital gains tax rules impact your investments and tax liability, Consult TaxBuddy Experts Today.
FAQs: Your Questions on New Capital Gains Tax Answered
When do the new capital gains tax rules come into effect in India?
The new capital gains tax rules are effective from July 23, 2024.
What is the new LTCG tax rate for listed shares after July 23, 2024?
The new LTCG tax rate for listed shares (under Sec 112A) is 12.5% on gains exceeding ₹1.25 lakh, without the benefit of indexation.
What is the new STCG tax rate for listed shares after July 23, 2024?
The new STCG tax rate for STT-paid listed shares (under Sec 111A) is 20%.
Is indexation benefit still available for LTCG on property?
For resident individuals and HUFs selling land and/or buildings acquired before July 23, 2024, and sold on or after that date, there's an option: choose the lower tax between 12.5% (no indexation) or 20% (with indexation). For properties acquired and sold on or after July 23, 2024, the 12.5% rate without indexation generally applies.
What is the new holding period for an asset to be considered long-term?
Generally, it's more than 12 months for listed securities (like shares, equity MFs, ReITs, InVITs) and more than 24 months for other assets (like unlisted shares, property, gold, most debt instruments) for transfers from July 23, 2024.
How are debt mutual funds taxed under the new rules if bought after April 1, 2023?
Gains from debt mutual funds (where equity holding is not more than 35%) acquired on or after April 1, 2023, are treated as Short-Term Capital Gains (STCG) and taxed at applicable slab rates, irrespective of the holding period (due to Sec 50AA).
Is there any change in capital gains tax in Budget 2025?
Budget 2025 did not introduce significant changes to the new capital gains tax rules that were established effective July 23, 2024, by the Finance (No. 2) Act, 2024.
What is the new LTCG exemption limit for listed equity shares (Section 112A)?
The exemption limit for LTCG on listed equity shares and specified equity-oriented mutual funds under Section 112A has been increased to ₹1.25 lakh per financial year.
How are gains from gold taxed now (post-July 23, 2024)?
LTCG on gold (held >24 months) is taxed at 12.5% without indexation. STCG on gold (held ≤24 months) is added to your income and taxed at slab rates.
Are the capital gains tax exemptions under Section 54, 54F, 54EC still available?
Yes, these rollover benefits/exemptions generally remain available, subject to their specific conditions and monetary caps (e.g., ₹10 crore cap for Sec 54/54F). Always check current provisions.
How will share buybacks be taxed from October 1, 2024?
From October 1, 2024, proceeds from share buybacks will be taxed as dividend income in the hands of the shareholders at their applicable slab rates.
What is the ITR filing deadline for AY 2025-26 considering these changes?
The ITR filing deadline for AY 2025-26 (for FY 2024-25) for most individuals and HUFs has been extended to September 15, 2025.
Do these new capital gains tax rules apply to NRIs?
Generally, yes, the new rates and holding periods apply to NRIs. However, TDS provisions are critical, and NRIs should always assess benefits under any applicable Double Taxation Avoidance Agreement (DTAA).
Where should I report these new capital gains in my ITR?
Updated ITR forms for AY 2025-26 (e.g., ITR-2, ITR-3 for those with capital gains) will have specific schedules/sections to report gains, likely requiring segregation of transactions before and after July 23, 2024.
What if I sold an asset before July 23, 2024?
If you sold an asset before July 23, 2024, the capital gains tax rules that were applicable before this date would apply to that specific transaction.
