Income Tax Budget 2024: Streamlining and Rationalizing Capital Gains
Short-term gains on specific financial assets will now be taxed at 20%, while gains on all other economic and non-financial assets will remain subject to their respective tax rates.
Long-term gains on all financial and non-financial assets will be taxed at 12.5%. To benefit lower—and middle-income groups, I propose increasing the capital gains exemption limit on certain financial assets to ₹1.25 lakh per year.
Listed financial assets held for over a year will be classified as long-term, whereas unlisted and non-financial assets must be held for at least two years to qualify as long-term. However, unlisted bonds and debentures, debt mutual funds, and market-linked debentures will still be taxed on capital gains at the applicable rates, regardless of the holding period.
What are the updates to the capital gains tax regime?
The long-anticipated simplification of the capital gains tax regime has arrived, though it comes with higher tax rates. Here are the fundamental changes that are significant for both markets and individual investors:
- Compared to the current rates, short-term capital gains (STCG) on specific financial assets will now be taxed at 20%.
- Long-term capital gains (LTCG) on all financial and non-financial assets will be taxed at 12.5%.
- The exemption limit for LTCG has been increased from ₹1 lakh to ₹1.25 lakh.
Streamlining of Capital Gains
· Short-term capital gains (STCG) on specific financial assets will now be taxed at 20%, up from the current rates.
· Long-term capital gains (LTCG) on all financial and non-financial assets will be taxed at 12.5%, an increase from the previous rates.
· The exemption limit for LTCG has been raised from ₹1 lakh to ₹1.25 lakh.