The capital gains tax regime introduced after the Union Budget 2024 has brought a more uniform tax structure for several asset classes, with long-term capital gains (LTCG) generally taxed at 12.5%, while short-term capital gains (STCG) continue to vary depending on the type of investment and whether securities transaction tax (STT) applies.
For equity mutual funds, exchange-traded funds (ETFs) and stocks, the holding period required to qualify as a long-term investment is more than 12 months. STCG on these assets is taxed at 20%, while LTCG is taxed at 12.5% on gains exceeding the applicable annual exemption threshold.
Gold ETFs, REITs and InvITs also qualify for LTCG treatment after a holding period of more than 12 months. Gold ETFs are subject to the investor’s applicable slab rate for STCG, while LTCG is taxed at 12.5%. REITs and InvITs attract a 20% STCG rate and 12.5% LTCG rate.
Debt MF taxation depends on when investment was made
For listed bonds, investments held for more than 12 months qualify as long-term capital assets. Short-term gains are taxed according to the investor’s income-tax slab, while long-term gains are taxed at 12.5%.
The taxation of debt mutual funds depends on when the investment was made. Debt mutual funds purchased before 1 April 2023, qualify for LTCG treatment after a holding period of more than 24 months and are taxed at 12.5%. Investments made on or after 1 April 2023 are subject to taxation at the investor’s applicable slab rate.
For physical gold, overseas mutual funds and fund-of-funds, the LTCG holding period is more than 24 months, with long-term gains taxed at 12.5%. Short-term gains are taxed at slab rates.
Foreign equities and international ETFs also require a holding period of more than 24 months to qualify for LTCG treatment. Long-term gains are taxed at 12.5%, while short-term gains are taxed according to the investor’s applicable slab rate.
The rules for real estate differ based on the date of purchase. Properties bought after 23 July 2024 are subject to a 12.5% LTCG tax rate after being held for more than 24 months. For properties purchased before 23 July 2024, taxpayers can compare the tax liability under the 12.5% rate without indexation with the earlier 20% rate with indexation and pay the lower amount.
The changes mean investors need to consider not only the asset class but also the purchase date and holding period when calculating their potential capital gains tax liability.
Radhika Goyal is Author of Taxconcept Gurugram head office, for deeply reported tax, gst and income tax articles on issues that matter. He splits her time between New Delhi and Bengaluru, and has worked as a reporter, a podcaster and an editor for publications across India.