The following FAQs have been released by the Income Tax Department on July 24, 2024, in response to the significant changes in capital gains taxation introduced in the Union Budget 2024. Effective from July 23, 2024, these amendments have sparked widespread discussions and queries among taxpayers. While the government aims to simplify the capital gains tax regime, the removal of indexation benefits has raised concerns among many.
Tweet by IT Department having link of FAQ
FAQs – New Capital Gains Taxation Regime
General Changes
Q1. What are the major changes brought about in the taxation of capital gains by the Finance (No.2) Bill, 2024? Ans. The taxation of capital gains has been simplified with changes in holding periods, rates, indexation, parity between residents and non-residents, while retaining roll-over benefits.
Holding Period
Q2. What is the date when the new taxation provisions come into force? Ans. The new provisions for taxation of capital gains come into force from 23.7.2024.
Q3. How has the holding period been simplified? Ans. The holding period is now two years for all assets except listed securities, which is one year.
Q4. Who will benefit from the change in holding period? Ans. Investors in listed units of business trusts (ReITs, InVITs), gold, and unlisted securities (other than unlisted shares) benefit from reduced holding periods.
Q5. What about the holding period of immovable property and unlisted shares? Ans. The holding period remains 24 months for immovable property and unlisted shares.
Watch below video to know the complete changes in Capital Gain tax Rates:
Tax Rates
Q6. Please elaborate on change in the rate structure for STT paid capital assets? Ans. Short-term capital gains tax on listed equity, equity-oriented mutual funds, and business trust units increased from 15% to 20%. Long-term capital gains tax on these assets increased from 10% to 12.5%.
Q7. Is there any change in the exemption limit for long-term capital gains under section 112A which was earlier one lakh Rs.? Ans. Yes, the exemption limit for long-term capital gains on listed securities increased from Rs. 1 lakh to Rs. 1.25 lakh for FY 2024-25 onwards.
Q8. Please elaborate on change in the rate structure for other long-term capital gains? Ans. The rate for other long-term capital gains on all assets has been rationalized to 12.5% without indexation.
Q9. Who will benefit by change in rate from 20% (with indexation) to 12.5% (without indexation)? Ans. Most taxpayers will benefit from the reduced rate, but the impact varies based on individual circumstances.
Rollover Benefits
Q10. Can the taxpayer continue to avail the roll over benefits on capital gains? Ans. Yes, roll-over benefits remain unchanged.
Q11. In which assets, can the long-term capital gains be invested for roll over benefits? Ans. Rollover benefits are available for investments in residential house, certain bonds, and other specified assets.
Q12. What is the amount up to which roll over benefit is available? Ans. The amount varies depending on the specific roll-over provision.
Overall Rationale
Q13. What is the overall rationale for changes? Ans. The changes aim to simplify tax computation, filing, and record-keeping by rationalizing rates and holding periods.
The changes in capital gains taxation introduced in the Union Budget 2024 aim to streamline the tax regime and broaden the tax base. While the government believes these modifications will benefit taxpayers in the long run, it is crucial to carefully analyze the implications of these changes on individual investment portfolios.
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Good information but we have to wait for clarity