The Finance Act 2024 has introduced a long-anticipated reform, simplified the tax rates and held periods for various assets.
Previously, various asset categories had different holding periods to be classified as Short-Term or Long-Term Capital Assets. Now, a uniform holding period of 12 and 24 months has been established, eliminating the former 36-month requirement.
The holding period for all listed securities and equity-oriented funds are now 12 months to be considered Long Term, whereas all other assets require a holding of 24 months. The exemption limit under Section 112A has been increased to Rs. 1.25 lakhs in a financial year. Long Term Capital Gains on the transfer of equity shares or equity-oriented units or units of Business Trust is increased from 10% to 12.5%. The tax on Long Term Capital Gains on other financial assets is reduced from 20% to 12.5%. Indexation benefit available on long term assets has been done away with (except for immovable property). Tax rate on Short-Term Gains has been raised to 20%. Additionally, capital gains from the sale of unlisted debentures and bonds transferred on or after July 23, 2024, will always be classified as short-term and taxed at slab rates, regardless of the holding period.
The amended rules specify the new tax rates for different types of securities as follows:
| S. No. | Particulars | Tax Rate |
| A | Short Term Capital Gains | |
| Listed Equity Shares | 20 | |
| Equity Oriented Mutual Funds | 20 | |
| Unlisted Equity Shares | Slab Rate | |
| B | Long Term Gains | |
| LTCG referred to in section 112(1)(a)/(b)/ (c)(i)/ (c)(ii) and (d) [other than capital gains referred to in section 10(33) and 10(36)] | 12.5% | |
| LTCG referred to in section 112A exceeding INR 1.25 lacs | 12.5% | |
| LTCG referred to in section 115AB, 115AC, 115ACA, 115AD and 115E | 12.5% | |
| LTCG on listed bonds and debentures | 12.5% | |
| Unlisted bonds and debentures | Applicable Rate |
However, for gains on Land and Buildings, taxpayers are given the option to choose from:
Tax rate of 12.5% in case indexation benefit not availed
Tax rate of 20% if indexation benefit availed
This change provides sellers with flexibility to select the option that aligns with their financial situation and the appreciation of their property. The cutoff date for these new rules is July 23, 2024. If the property is purchased before this date, you can choose between the old and new tax regimes – either 12.5% tax without indexation or 20% tax with indexation, depending on which option offers greater benefits.
The roll-over benefits remain unchanged under the IT Act. Taxpayers can still take advantage of these benefits to defer Long Term Capital Gains (LTCG) tax, provided they meet the necessary conditions. They can invest their gains in residential property under Sections 54 or 54F, or in specific bonds under Section 54EC. This consistency allows investors to maintain and enhance their tax savings effectively. Stay informed and make strategic decisions to ensure your investments are as tax-efficient as possible in this evolving environment.