Budget 2024 changed India's capital gains tax structure significantly. Understanding the new rates is critical for planning your investment redemptions and minimizing your tax outgo.
The New Rates at a Glance (Post Budget 2024)
| Asset Type | Holding Period | Tax Rate | Exemption Limit |
|---|---|---|---|
| Listed Equity Shares / Equity MF | < 12 months (STCG) | 20% | None |
| Listed Equity Shares / Equity MF | ≥ 12 months (LTCG) | 12.5% | ₹1.25 lakh/year |
| Debt MF / Bonds | Any period | Slab rate | None |
| Property (Residential) | < 24 months (STCG) | Slab rate | None |
| Property (Residential) | ≥ 24 months (LTCG) | 12.5% (no indexation) | None |
| Gold / SGB | < 36 months (STCG) | Slab rate | None |
| Gold / SGB | ≥ 36 months (LTCG) | 12.5% | None |
⚠️ Important: The indexation benefit for property LTCG was removed in Budget 2024, replaced by a flat 12.5% rate. For older properties, this may actually result in higher tax in many cases.
Understanding the ₹1.25 Lakh LTCG Exemption
For equity shares and equity-oriented mutual funds, the first ₹1.25 lakh of LTCG in a financial year is tax-free. Only gains above this threshold are taxed at 12.5%.
Worked Example 1: Equity Mutual Fund Redemption
Scenario: You redeem equity MF units in March 2025. Purchase value: ₹5 lakh. Redemption value: ₹8 lakh. Holding period: 2 years.
- Total LTCG = ₹8L − ₹5L = ₹3 lakh
- Exemption = ₹1.25 lakh
- Taxable LTCG = ₹3L − ₹1.25L = ₹1.75 lakh
- Tax @12.5% = ₹21,875
- Effective tax rate on total gains = 7.3%
Worked Example 2: Short-Term (STCG)
Scenario: You buy and sell Infosys shares within 9 months. Buy at ₹1,400, sell at ₹1,700 × 100 shares.
- STCG = (1,700 − 1,400) × 100 = ₹30,000
- Tax @20% = ₹6,000
- No exemption for STCG
Tax Harvesting: Using the ₹1.25 Lakh Exemption Every Year
Smart investors practice "tax harvesting" — selling enough equity MF units each year to book up to ₹1.25 lakh in LTCG tax-free, then immediately reinvesting. Over 20 years, this can save significant tax.
💡 Pro Tip: If your total LTCG is below ₹1.25 lakh for the year, you owe zero tax on equity gains. Always review your unrealized gains in February–March before the financial year ends.
Securities Transaction Tax (STT)
STT is levied at source on every equity trade: 0.1% on delivery buy + sell, 0.025% on intraday sells, 0.0625% on F&O sells. STT is not an offset against capital gains tax — it's a separate, non-refundable levy.
How to Report Capital Gains in ITR
- Use ITR-2 (if you have capital gains income)
- Your broker provides Capital Gains Statement — download from broker portal
- Zerodha's Tax P&L report, HDFC Securities' Tax Statement auto-populate schedules
- Enter in Schedule CG (Capital Gains)
- LTCG goes in Schedule 112A; STCG in 111A