Budget 2024: Here are 3 crucial changes in capital gains tax from Finance Minister’s announcement

Budget 2024: Finance Minister Nirmala Sitharaman announced the Union Budget 2024 on Tuesday, July 23. The budget for the financial year 2024-2025 has recorded capital gains tax changes affecting short-term financial assets and long-term assets.

“Capital gains taxation is also proposed to be hugely simplified,” said Nirmala Sitharaman in the Budget speech.

Changes in short-term capital gains tax:

1. The Government of India has increased the capital gains tax for short-term assets in the specified segment.
2. India's Finance Minister Nirmala Sitharaman announced that short-term capital gains tax has been increased to 20 per cent from 15 per cent for specified financial assets for the year 2024-2025.
3. “Short-term gains on specified financial assets shall henceforth attract a tax rate of 20 per cent instead of 15 per cent, while that on all other financial assets and non-financial assets shall continue to attract the applicable tax rate,” said Nirmala Sitharaman, the Union Finance Minister of India in the budget announcement.
4. According to the announcement, all the other financial and non-financial assets will continue will attract the applicable tax rate.

Changes in long-term capital gains tax:

1. The long-term gains tax on all financial and non-financial assets will be taxed at 12.5 per cent for the financial year 2024-25.
2. The government aims to benefit the middle and lower-income classes of people through its proposal of increasing the limit of exemption of capital gains.
3. The exemptions of capital gains have been increased to ₹1.25 lakh per year, from the previous value of ₹1 lakh per year, as per the Budget 2024.
4. “Long-term gains on all financial and non-financial assets, on the other hand, will attract a tax rate of 12.5 per cent. For the benefit of the lower and middle-income classes, it is proposed to increase the limit of exemption of capital gains on certain listed financial assets from ₹1 lakh to ₹1.25 lakh per year,” said Sitharaman in the announcement.

Eligibility for long-term assets:

1. All the listed assets exceeding the period of a year in holding will be considered long-term assets.
2. In the case of all unlisted financial and non-financial assets, the holding period will be for at least two years to be classified under the long-term asset category, according to the Budget announcement.
3. Assets like unlisted bonds and debenture, debt mutual funds and market-linked debentures, irrespective of holding period will attract the capital gains tax at the above applicable rates, as per the Budget.