The Ministry of Finance has unveiled changes to capital gains taxation in the Union Budget 2024-25. Under the new rules, short-term capital gains on certain financial assets will be taxed at 20%, while gains from all other assets will retain their existing rates. Long-term capital gains on both financial and non-financial assets will be taxed at a reduced rate of 12.5%. To benefit lower and middle-income individuals, the exemption limit for long-term capital gains on financial assets has been increased from ₹1 lakh to ₹1.25 lakh annually. Financial assets held for more than a year will be considered long-term, while unlisted financial assets and non-financial assets must be held for at least two years. Additionally, unlisted bonds, debt mutual funds, and market-linked debentures will be taxed according to applicable rates, regardless of the holding period. These measures aim to simplify and rationalize capital gains taxation, benefiting a broader segment of taxpayers.
Capital Gains Taxation Simplified and Rationalised
Short-Term Gains to Attract a Tax Rate of 20 Per Cent and Long-Term Gains to Attract a Tax Rate of 12.5 Per Cent
Limit of Exemption of Long-Term Capital Gains on Financial Assets Increased from ₹1 Lakh to ₹1.25 Lakh Per Year
Simplification and Rationalization of the Capital Gains Tax was one of the key focus areas of the Union Budget 2024-25, presented by the Union Finance and Corporate Affairs Minister Smt. Nirmala Sitharaman in the Parliament today.
As proposed by Smt. Sitharaman, short term gains on certain financial assets shall henceforth attract a tax rate of 20 per cent, while that on all other financial assets and all non-financial assets shall continue to attract the applicable tax rate.
Finance Minister proposed that the long term gains on all financial and non-financial assets will attract a tax rate of 12.5 per cent. For the benefit of the lower and middle-income classes, she proposed to increase the limit of exemption of capital gains on certain financial assets from ₹ 1lakh to ₹ 1.25 lakh per year.
She stated that the listed financial assets held for more than a year will be classified as long term, while unlisted financial assets and all non-financial assets will have to be held for at least two years to be classified as long-term.
Finance Minister added that the unlisted bonds and debentures, debt mutual funds and market linked debentures, irrespective of holding period, will attract tax on capital gains at applicable rates.
