What is capital gain Tax and Changes in Budget 2024 ?
A capital gain refers to the increase in the value of a capital asset when it is sold. It occurs when you sell an asset for more than what you originally paid for it.
Almost any type of asset you own is a capital asset. This can include a type of investment (like a stock, bond, or real estate) or something purchased for personal use (like furniture or a boat).
Capital gains are realized when you sell a capital asset by subtracting the original purchase price from the sale price. The Internal Revenue Service (IRS) taxes individuals on gains from the sale under certain circumstances.
Budget 2024 Updates on capital gain Tax
Budget 2024 has proposed the following amendments effective from FY 2024-25 –
For classifying assets into long-term and short-term, there will only be two holding periods: 12 months and 24 months. The 36-month holding period has been removed
The holding period for all listed securities is 12 months. All listed securities with a holding period exceeding 12 months are considered Long-Term. The holding period for all other assets is 24 months.
The taxation of Short-Term Capital Gain for listed equity shares, a unit of an equity-oriented fund, and a unit of a business trust has been increased to 20% from 15%.
Read Also: Section 54EC – Exemptions Under Capital Gain Bonds
Other financial and non-financial assets which are held for short term shall continue to attract the tax at slab rates
The limit on the exemption of Long-Term Capital Gains on the transfer of equity shares or equity-oriented units or units of Business Trust has increased from Rs.1 Lakh to Rs.1.25 lakh per year. However, the rate at which it is taxed has increased from 10% to 12.5%. The exemption limit to Rs. 1.25 lakhs has been increased for the whole of the year, whereas the tax rate has changed on 23rd July 2024.
The tax on other assets is reduced from 20% to 12.5% with effect from 23rd July 2024. On the other hand, the indexation benefit that previously was available on the sale of long-term assets has now been eliminated.
However, the Government has given taxpayers an option to compute taxes on real estate transactions purchased before 23rd July 2024 either at 12.5% without indexation or at 20% with indexation.
