Finance Minister Nirmala Sitharaman presented the Union Budget 2024 on the 23rd of July, announcing changes to taxing capital gains. These changes will affect your profits from investments.
Let's break down what was said and what it means for you.
Major Announcements
1. Short-Term Gains: Some financial assets will be taxed at a 20% rate, while others will be taxed at the usual rate.
2. Long-Term Gains: All financial and non-financial assets will have a tax rate of 12.5%.
3. Exemption Limit: The exemption limit for long-term gains on some financial assets is increased to ₹1.25 lakh per year.
4. Listed Financial Assets: Assets held for over a year will be considered long-term.
5. Unlisted Financial and Non-Financial Assets: To be considered long-term, these must be held for at least two years.
6. Other Assets: Unlisted bonds, debentures, debt mutual funds, and market-linked debentures will be taxed at the usual rates, no matter how long they are held.
What Do These Changes Mean?
1. Holding Period: The time you need to hold some assets to be taxed at the long-term rate has changed.
2. Tax Rates: The rates themselves have changed for most assets. Also, investors used to get an indexation benefit on long-term gains from some assets. This is now replaced with a flat 12.5% tax.
New Capital Gains Tax Rates (Effective from July 23, 2024)
Listed Shares and Equity Mutual Funds:
- Short-Term Gains (STCG): Now taxed at 20% (up from 15%).
- Long-Term Gains (LTCG): Now taxed at 12.5% (up from 10%).
- Holding Period: 12 months (unchanged).
Unlisted and Foreign Shares:
- LTCG: Now taxed at 12.5% (down from 20%).
- STCG: Taxed according to slab rates (unchanged).
- Holding Period: 24 months.
Listed Bonds:
- LTCG: Now taxed at 12.5% (up from 10%).
- STCG: Taxed according to slab rates (unchanged).
Debt ETFs/Mutual Funds:
- Gains: Taxed at slab rates, no matter the holding period.
Physical Real Estate:
- LTCG: Now taxed at 12.5% (down from 20%).
- STCG: Taxed according to slab rates (unchanged).
- Holding Period: 24 months.
Physical Gold:
- LTCG: Now taxed at 12.5% (down from 20%).
- STCG: Taxed according to slab rates (unchanged).
- Holding Period: 24 months (down from 36 months).
These changes apply from July 23, 2024. Gains made before this date follow old tax rules.
Increase in Securities Transaction Tax (STT) on Futures and Options (F&O)
Starting October 1, 2024:
- Futures Contracts: STT will increase from 0.0125% to 0.02%.
- Options Contracts: STT will increase from 0.0625% to 0.1%.
| Old STT rate | Applicable STT | New STT rate | Applicable STT |
Nifty Futures 1 lot (25 quantity) @ ₹25000 | 0.0125% | ₹78 | 0.02% | ₹125 |
Nifty Options 1 lot (25 quantity) @ ₹1000 | 0.0625% | ₹16 | 0.1% | ₹25 |
Other Changes
1. Income from Buybacks: Now taxable like dividend income at your slab rate. The amount paid for buying shares will be treated as a capital loss and can offset other gains.
2. TDS on Government Securities: Starting October 1, 2024, interest over ₹10,000 will have a 10% TDS.
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