Capital Gains Tax is one of the key components of income tax, levied on profit earned from the transfer of a capital asset. The Finance Act (No. 2), 2024, has brought significant changes, particularly impacting debt mutual funds and unlisted assets.
Let’s break down the updated holding periods, types of gains, and applicable tax rates for different assets effective from 23rd July 2024.
✅ Key Points to Note:
- Applicability: Capital Gain Tax is applicable on transfer of a capital asset.
- Types of Capital Assets:
i. Long Term Capital Asset (LTCA)
ii. Short Term Capital Asset (STCA)
📊 Holding Period of Capital Assets
| Category | Type of Capital Asset | Before 23/07/2024 | On/After 23/07/2024 |
|---|---|---|---|
| A | i) Listed Securities, ii) UTI Units, iii) Equity-oriented Mutual Funds, iv) Zero Coupon Bonds | < 1 year – STCA > 1 year – LTCA | < 1 year – STCA > 1 year – LTCA |
| B | i) Unlisted Shares ii) Immovable Property | < 2 years – STCA > 2 years – LTCA | < 2 years – STCA > 2 years – LTCA |
| C | Any Other Asset | < 3 years – STCA > 3 years – LTCA | < 2 years – STCA > 2 years – LTCA |
💰 Tax Rates for Capital Assets
| Capital Asset | Type of Gain | Before 23/07/2024 | On/After 23/07/2024 |
|---|---|---|---|
| Listed Equity Shares / Equity-oriented Units (with STT) | LTCG (Sec. 112A) | 10% (Above ₹1 lakh) | 12.5% (Above ₹1.25 lakh) |
| STCG (Sec. 111A) | 15% | 20% | |
| Immovable Property | LTCG | 20% with Indexation | 12.5% without Indexation or 20% with Indexation (Individual/HUF) Whichever is beneficial Note: for other it is 12.5% without indexation |
| STCG | As per Normal Slab Rate | As per Normal Slab Rate | |
| Other Capital Assets | LTCG | 20% | 12.5% |
| STCG | As per Normal Slab Rate | As per Normal Slab Rate |
📦 Tax Rates for Equity & Debt Mutual Funds
| Type of Fund | Type of Gain | Acquired On/Before 01/04/2023 | Acquired After 01/04/2023 |
|---|---|---|---|
| Debt Fund | LTCG | 20% with Indexation | Normal Slab Rate |
| STCG | Normal Slab Rate | Normal Slab Rate | |
| Equity Fund | LTCG | 10% over ₹1.25 lakh | 10% over ₹1.25 lakh |
| STCG | 15% | 20% |
📝 Note:
a) W.e.f. 01.04.2023, capital gains on Debt Mutual Funds, Market Linked Debentures, and Unlisted Debentures are always considered short-term, and taxed at normal slab rates.
b) A fund investing more than 65% in equities is treated as an Equity Fund.
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