Updated Capital Gains Taxation Rules In India (FY 2024-25): Complete Guide For Investors About LTCG & STCG

To make taxation easier and to encourage investments over the long term, the Indian government announced new capital gains tax rates that will begin on July 23, 2024. These changes for different asset classes will have an impact on LTCG as well as STCG. Investors need to learn about these changes so they can make better decisions about their investments and taxes.

Key Changes To Capital Gains Taxation

Significant changes to the taxation of capital gains have been announced by the government, and the government has also clarified certain items and given a boost to long-term capital gains, which includes temporary inflation, so these changes have also substantially flipped the amounts of taxes and benefits applicable to various forms of goods. Good work has been put done:)

1. Rates increased.

For most asset classes, the LTCG rates have been increased from 10% to 12.5%.

We now pay the capital gains taxes on short-term capital gains from listed equity shares and equity mutual funds at 20% as opposed to 15%.

2. Indexation benefit taken away.

Indexation benefit is the benefit that allows a purchaser to apply inflation to the cost of purchase, and for most asset classes, including debt mutual funds and real property, is taken away.

3. New exemption limit.

The exemption is for LTCG made from listed equity shares and equity mutual funds, and the exempt limit has risen to ₹1.25 lakhs a year.

4. Change for Foreign Investors.

The new rates will also apply to FPIs and NRIs, so their investment returns are also likely to change.

Tax Planning Suggestions

Effective tax planning helps investors minimise liabilities and maximise post-tax returns. The following strategies can guide individuals in aligning their investments with the updated capital gains tax structure.

• Longer Time Influences: Investors should rethink how long they invest in their assets, and consider a longer time horizon, as it is a tax-effective preference to use the lower LTCG tax rate.

• Diversification: Investments in multiple asset types can offer portfolio diversification while also providing tax benefit options.

• Professional Advice: Speak with a tax professional, as they may have a variety of tailored plans or strategies use that may help your specific tax situation, i.e., the new capital gains regime.