Saving Taxes!
Any profit and gains arising from the transfer of capital assets such as property, shares, bonds, vehicles, etc., shall be chargeable to tax under the head "Income from Capital Gains." Capital assets are classified into Short-Term and Long-Term Assets. Short-Term Capital Gain / Loss arises if a Short-Term Capital Asset is transferred.
Key Takeaways
Broadly speaking, the following is the summary of significant points discussed in this article:
- Listed equity shares, equity oriented fund and units of business trust are Short-Term Capital Assets if held up to 12 months, taxed at :
- 15% when the asset is transferred before 23rd July, 2024.
- 20% when the asset is transferred from 23rd July, 2024.
- If the assets are sold from 23rd July 2024, capital assets other than above are Short Term if held up to 24 months, taxed at slab rates.
- If the assets are sold before 23rd July 2024, holding period differs - ranging from 24 to 36 months.
- Market linked debentures, debt mutual funds, unlisted debentures and bonds are always considered short term irrespective of period of holding.
- Exemption under section 54B and 54D can be claimed even for Short-Term Capital Gains for specified assets.
Capital Assets are classified as short term or long term based on holding period. The table below shows the holding period for different types of capital assets, which determines whether they are categorized as short-term or long-term.
Asset Type | Period of Holding for Determination of Short Term and Long Term | |
| Transferred Before 23rd July 2024 | Transferred From 23rd July 2024 |
| Up to 12 months | Up to 12 months |
| Up to 24 months | Up to 24 months |
Other Assets | Up to 36 months | Up to 24 months |
The Short-Term Capital Gain can be calculated as follows:
Particulars | Amount | Amount |
Full value of consideration | xxx | |
Less: Expenses incurred wholly and exclusively for such transfer | (xxx) | |
Net sale consideration | xxx | |
Less: Cost of acquisition | xxx | |
Less: Cost of improvement | xxx | |
Short-term Capital Gains(STCG) | xxx | |
Less: Exemptions under section 54B/54D | xxx | |
Short-Term Capital Gains chargeable to tax | xxx |
The short-term capital gain tax rate varies depending on the type of asset being sold. The tax rates applicable for different types of assets are as follows:
Ravi bought a house in 2024 for Rs. 20,00,000. He sold it in 2025 for Rs. 65,00,000. Calculate the taxable capital gain.
Particulars | Amount | Amount |
Full value of consideration | 65,00,000 | |
Less: Expenses incurred wholly and exclusively for such transfer | Nil | |
Net sale consideration | 65,00,000 | |
Less: Cost of acquisition | 20,00,000 | |
Less: Cost of improvement | Nil | |
Short-term Capital Gains(LTCG) | 45,00,000 | |
Less: Exemptions under section 54B/54D | Nil | |
Short-Term Capital Gains chargeable to tax | 45,00,000 |
In Budget 2024, the finance minister made numerous changes to the way capital gains was taxed as per the Income-tax Act, 1961.
A major change brought in this budget was in the taxation of units of specified mutual funds (i.e., debt / hybrid mutual funds).
Before 23rd July 2024, units of Specified Mutual Funds are taxed as short-term or long-term basis a holding period of 36 months. The tax rate also depended on the nature of capital gains, i.e., in case of Short-Term Capital Gains it was taxed as slab rates whereas in the case of Long-Term Capital Gains the tax rate was 20% with the availability of indexation on the cost of acquisition of such units.
With effect from 23rd July 2024, taxation on units of Specified Mutual Funds has been changed, and it is proposed to tax it on a short-term basis at the slab rates applicable to the taxpayer. So, the gains on Specified Mutual Fund shall be taxable as Short Term Capital Gains irrespective of the holding period of the Units. This change is proposed to apply to units acquired after 1st April 2023.
Specified Mutual Funds has been defined as those mutual funds:
As the landscape of capital gains taxation is ever dynamic, given the market movements and government policies and plans, it is important to stay updated related to recent tax rates for error-free compliance and to avoid adverse consequences.
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3. LTCG Tax Rates, How to Calculate, Exemptions & Examples
6. Capital Gains Tax on the Sale of Property and Jewellery
7. Capital Gains Exemption
8. Capital Gains for Beginners