Capital gains tax is applicable when you sell a capital asset such as shares, mutual funds, property, or gold. The tax rate and holding period to classify gains as short-term or long-term depends on the type of asset and has recently changed.
On 23 July 2024, the Government of India introduced new rules to bring uniformity in the taxation of capital gains. This guide explains the old and new rules clearly for all major asset categories.
What is Capital Gain?
Capital gain refers to the profit made from selling a capital asset for more than its purchase price. Capital gains are of two types:
- Short-Term Capital Gain (STCG): When the asset is held for a short period
- Long-Term Capital Gain (LTCG): When the asset is held for a longer duration
Holding Period: Short-Term vs Long-Term (Before & After 23 July 2024)
| Before 23rd July 2024 | After 23rd July 2024 | |||
| Asset Type | Short-Term | Long-Term | Short-Term | Long-Term |
| Equity shares / Equity mutual funds | ≤ 12 months | > 12 months | ≤ 12 months | > 12 months |
| Debt mutual funds | ≤ 36 months | > 36 months | ≤ 24 months | > 24 months |
| Unlisted shares | ≤ 24 months | > 24 months | ≤ 24 months | > 24 months |
| Immovable property | ≤ 24 months | > 24 months | ≤ 24 months | > 24 months |
| Gold / Other capital assets | ≤ 36 months | > 36 months | ≤ 24 months | > 24 months |
Capital Gains Tax Rates: Before & After 23 July 2024
| Before 23rd July 2024 | After 23rd July 2024 | |||
| Asset Type | STCG Rate (Before) | LTCG Rate (Before) | STCG Rate (After) | LTCG Rate (After) |
| Equity shares / Equity mutual funds (STT Paid) | 15% | 10% (exempt up to ₹1L) | 20% | 12.5% |
| Debt mutual funds | Slab rate | 20% with indexation | Slab rate | 12.5% |
| Unlisted shares | Slab rate | 20% with indexation | Slab rate | 12.5% |
| Immovable property | Slab rate | 20% with indexation | Slab rate | 12.5% w/o indexation and 20% with indexation (exempt up to ₹1.25L) |
| Gold / Other capital assets | Slab rate | 20% with indexation | Slab rate | 12.5% |
Key Points to Remember
‘Exempt up to ₹1.25L’ means you don’t pay tax on LTCG from equity if the total gain in a year is ₹1.25 lakh or less.
After 23 July 2024, indexation benefit is removed across all asset classes for LTCG (except on Immovable property purchased prior to 23rd July 2024).
STCG on non-equity assets continues to be taxed as per the individual’s slab rate.
Examples
1. You bought shares in June 2023 and sold them in August 2024 (holding >12 months):
→ LTCG @ 12.5%, with ₹1.25L exemption
2. You sold a plot bought in Jan 2022 in Aug 2024 (holding >24 months):
You can choose:
- LTCG @ 20% with indexation (old regime)
OR
- LTCG @ 12.5% flat (new regime, no indexation) — whichever is more tax-efficient
3. You sold gold held for 20 months:
→ STCG as per your income slab
Set-Off and Carry Forward of Losses
- Short-term capital loss (STCL) can be set off against both STCG and LTCG
- Long-term capital loss (LTCL) can be set off only against LTCG
- Capital losses can be carried forward for 8 years if the ITR is filed within due date
Conclusion
The changes introduced from 23 July 2024 have simplified the capital gains tax structure. With uniform holding periods and flat tax rates, it’s now easier to plan investments. However, the removal of indexation and increased STCG on equity means investors should be more strategic in booking profits. Always consult a tax expert for high-value transactions.
Special Case: Property Purchased Before 23 July 2024
For immovable property (like land or building) purchased before 23 July 2024 and held for more than 24 months, the old regime still applies. That means the long-term capital gains will be taxed at 20% with indexation benefit. This grandfathering ensures that earlier investment decisions continue to receive indexation advantage. This rule is only applicable if the property was acquired before 23 July 2024 and sold after the minimum holding period.
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