The Finance Bill 2024 introduces significant changes to the taxation of capital gains, aimed at simplification and rationalization. Key reforms include reducing the holding periods for determining short-term and long-term capital gains to 12 and 24 months respectively, with exceptions for specific asset classes. The tax rate on short-term capital gains for equity shares and equity-oriented funds is proposed to increase from 15% to 20% to curb tax benefits primarily benefiting high net worth individuals. For long-term capital gains, a uniform tax rate of 12.5% is proposed across all asset categories, with exemptions up to 1.25 lakh rupees for certain securities. Additionally, indexation benefits for long-term capital gains on property, gold, and other unlisted assets are proposed to be removed, simplifying tax calculations. The amendments also seek to align tax rates for residents and non-residents, impacting withholding tax provisions and introducing uniformity in rates across various asset types. These changes are set to take effect from July 23, 2024, pending legislative approval.
Budget 2024: Rationalisation and Simplification of taxation of Capital Gains
The taxation of capital gains is proposed to be rationalized and simplified. There are three components to this simplification. Firstly, it is proposed that there will only be two holding periods, 12 months and 24 months, for determining whether the capital gains is short-term capital gains or long term capital gains. For all listed securities, the holding period is proposed to be 12 months and for all other assets, it shall be 24 months. Accordingly, amendment is proposed in clause (42A) of section 2 of the Act. Thus units of listed business trust will now be at par with listed equity shares at 12 months instead of earlier 36 months. The holding period for bonds, debentures, gold will reduce from 36 months to 24 months. For unlisted shares and immovable property it shall remain at 24 months.
2. Secondly, the rate for short-term capital gain under provisions of section 111A of the Act on STT paid equity shares, units of equity oriented mutual fund and unit of a business trust is proposed to be increased to 20% from the present rate of 15% as the present rate is too low and the benefit from such low rate is flowing largely to high net worth individuals. Other short-term capital gains shall continue to be taxed at applicable rate.
2.1 The rate of long-term capital gains under provisions of various sections of the Act is proposed to be 12.5% in respect of all category of assets. This rate earlier was 10% for STT paid listed equity shares, units of equity-oriented fund and business trust under section 112A and for other assets it was 20% with indexation under section 112. However, an exemption of gains upto 1.25 lakh (aggregate) is proposed for long-term capital gains under section 112A on STT paid equity shares, units of equity oriented fund and business trust, thus, increasing the previously available exemption which was upto 1 lakh of income from long term capital gains on such assets. For bonds and debentures, rate for taxation of long-term capital gains was 20% without indexation. For listed bonds and debentures, the rate shall be reduced to 12.5%. Unlisted debentures and unlisted bonds are of the nature of debt instruments and therefore any capital gains on them should be taxed at applicable rate, whether short-term or long-term. It is proposed accordingly.
2.2 Thus, unlisted debentures and unlisted bonds are proposed to be brought to tax at applicable rates by including them under provisions of section 50AA of the Act. This amendment in section 50AA shall come into effect from the 23rd day of July, 2024.
3. Thirdly, simultaneously with rationalisation of rate to 12.5%, indexation available under second proviso to section 48 is proposed to be removed for calculation of any long-term capital gains which is presently available for property, gold and other unlisted assets. This will ease computation of capital gains for the taxpayer and the tax administration.
4. Parity in taxation between resident and non-resident assesses: To bring parity of taxation between residents and non-residents, corresponding amendments to section 115AD, 115AB, 115AC, 115ACA and 115E are being made to align the rates of taxation in respect of long-term capital gains proposed under section 112A and 112 and rates of short term capital gains proposed under section 111A.
5. Further, consequential amendments to align the withholding tax provisions with the substantive provisions to give effect to the proposed changes in rates of capital gains tax are being made under section 196B and 196C.
6. These proposals are proposed to be given effect immediately i.e. with effect from the 23rd of July, 2024.
Extract of Clause 3 of Finance Bill 2024
Clause 3 of the Bill seeks to amend section 2 of the Income-tax Act relating to definitions.
Clause (42A) of the section 2 provides that “short-term capital asset” means a capital asset held by an assessee for not more than thirty-six months immediately preceding the date of its transfer, provided that in the case of a security (other than a unit) listed in a recognized stock exchange in India or a unit of the Unit Trust of India established under the Unit Trust of India Act, 1963 (52 of 1963) or a unit of an equity oriented fund or a zero coupon bond or in case of a share of a company (not being a share listed in a recognised stock exchange) or a unit of a Mutual Fund specified under clause (23D) of section 10, which is transferred during the period beginning on the 1st day of April, 2014 and ending on the 10th day of July, 2014, the period of holding for the purposes of this clause would be twelve months. The clause also provides that in the case of a share of a company, not being a share listed in a recognised stock exchange in India, or an immovable property, being land or building or both, the period of holding for the purposes of the clause would be twenty-four months.
It is proposed to amend the said clause so as to provide that a “short-term capital asset” would mean a capital asset held by an assessee for not more than twenty-four months immediately preceding the date of its transfer.
It is further proposed to amend the first proviso so as to substitute the period of thirty-six months to twenty-four months in order to align the proviso with the amendment proposed above.
It is also proposed to amend the second proviso to insert the words, brackets, letters and figures “as it stood immediately prior to the commencement of the Finance (No.2) Act, 2024” after the words “had been substituted”. It is also proposed to omit the third proviso thereof.
This amendment will take effect retrospectively from 23rd July, 2024.
Extract of Clause 20 of Finance Bill 2024
Clause 20 of the Bill seeks to amend section 48 of the Income-tax Act relating to mode of computation.
The second proviso to the said section provides that where long-term capital gain arises from the transfer of a long-term capital asset, other than capital gain arising to a non-resident from the transfer of shares in, or debentures of, an Indian company referred to in the first proviso, the provisions of clause (ii) of the section shall have effect as if for the words “cost of acquisition” and “cost of any improvement”, the words “indexed cost of acquisition” and “indexed cost of any improvement” had respectively been substituted.
It is proposed to amend the said proviso so as to limit its applicability to cases where long-term capital gain arises from the transfer which takes place before the 23rd day of July, 2024, of a long-term capital asset, other than capital gain arising to a non-resident from the transfer of shares in, or debentures of, an Indian company referred to in the first proviso.
This amendment will take effect retrospectively from 23rd July, 2024.
Extract of Clause 21 of Finance Bill 2024
Clause 21 of the Bill seeks to amend section 50AA of the Income-tax Act relating to Special provision for computation of capital gains in case of Market Linked Debenture.
It is proposed to substitute the opening portion of the said section so as to provide that notwithstanding anything contained in clause (42A) of section 2 or section 48, where the capital asset––
(a) is a unit of a Specified Mutual Fund acquired on or after the 1st day of April, 2023 or a Market Linked Debenture; or
(b) is an unlisted bond or an unlisted debenture which is transferred or redeemed or matures on or after the 23rd day of July, 2024;
the full value of consideration received or accruing as a result of the transfer or redemption or maturity of such debenture or unit or bond as reduced by—
(i) the cost of acquisition of the debenture or unit or bond; and
(ii) the expenditure incurred wholly and exclusively in connection with such transfer or redemption or maturity,
shall be deemed to be the capital gains arising from the transfer of a short-term capital asset. This amendment will take effect retrospectively from 23rd July, 2024.
Clause (ii) of the Explanation to the said section provides that for the purposes of the section, “Specified Mutual Fund” means a Mutual Fund by whatever name called, where not more than thirty-five per cent. of its total proceeds is invested in the equity shares of domestic companies, provided that the percentage of equity shareholding held in respect of the Specified Mutual Fund shall be computed with reference to the annual average of the daily closing figures.
It is further proposed to substitute the clause (ii) of the Explanation and its proviso to provide that “Specified Mutual Fund” means a Mutual Fund by whatever name called, which invests more than sixty-five per cent. of its total proceeds in debt and money market instruments, or a fund which invests sixty-five per cent. or more of its total proceeds in units of a fund referred to in sub-clause (a), provided that the percentage of investment in debt and money market instruments or in units of a fund, as the case may be, in respect of the Specified Mutual Fund, shall be computed with reference to the annual average of the daily closing figures, and provided further that for the purposes of this clause, “debt and money market instruments” shall include any securities, by whatever name called, classified or regulated as debt and money market instruments by the Securities and Exchange Board of India.
This amendment will take effect from 1st April, 2026 and will, accordingly, apply in relation to the assessment year 2026-2027 and subsequent years.
Extract of Clause 29 of Finance Bill 2024
Clause 29 of the Bill seeks to amend section 111A of the Income-tax Act relating to tax on short-term capital gains in certain cases.
The said section, inter alia, provides that where the total income of an assessee includes any income chargeable under the head “Capital gains”, arising from the transfer of a short-term capital asset, being an equity share in a company or a unit of an equity oriented fund or a unit of a business trust and—
(a) the transaction of sale of such equity share or unit is entered into on or after the date on which Chapter VII of the Finance (No. 2) Act, 2004 comes into force; and
(b) such transaction is chargeable to securities transaction tax under that Chapter, the tax payable by the assessee on the total income shall be the aggregate of—
(i) the amount of income-tax calculated on such short-term capital gains at the rate of fifteen per cent; and
(ii) the amount of income-tax payable on the balance amount of the total income as if such balance amount were the total income of the assessee:
Provided that in the case of an individual or a Hindu undivided family, being a resident, where the total income as reduced by such short-term capital gains is below the maximum amount which is not chargeable to income-tax, then, such short-term capital gains shall be reduced by the amount by which the total income as so reduced falls short of the maximum amount which is not chargeable to income-tax and the tax on the balance of such short-term capital gains shall be computed at the rate of fifteen per cent
It is proposed to substitute longline so as to provide that the tax payable by the assessee on the total income shall be the aggregate of—
(i) the amount of income-tax calculated on such short term capital gains:––
(a) at the rate of fifteen per cent. for any transfer which takes place before the 23rd day of July, 2024 ; and
(b) at the rate of twenty per cent. for any transfer which takes place on or after the 23rd day of July, 2024;
(ii) the amount of income-tax payable on the balance amount of the total income as if such balance amount were the total income of the assessee.
It is further proposed that in the case of an individual or a Hindu undivided family, being a resident, where the total income as reduced by such short-term capital gains is below the maximum amount which is not chargeable to income-tax, then, such short-term capital gains shall be reduced by the amount by which the total income as so reduced falls short of the maximum amount which is not chargeable to income-tax and the tax on the balance of such short-term capital gains shall be computed at the rate as applicable in clause (i).
These amendments will take effect retrospectively from 23rd July, 2024.
Extract of Clause 30 of Finance Bill 2024
Clause 30 of the Bill seeks to amend section 112 of the Income-tax Act relating to tax on long-term capital gains.
The said section provides that where the total income of an assessee includes any income, arising from the transfer of a long-term capital asset, which is chargeable under the head “Capital gains”, the tax payable by the assessee on the total income shall be the aggregate of,—
(a) in the case of an individual or a Hindu undivided family, being a resident,—
(i) the amount of income-tax payable on the total income as reduced by the amount of such long-term capital gains, had the total income as so reduced been his total income; and
(ii) the amount of income-tax calculated on such long-term capital gains at the rate of twenty per cent.:
Provided that where the total income as reduced by such long-term capital gains is below the maximum amount which is not chargeable to income-tax, then, such longterm capital gains shall be reduced by the amount by which the total income as so reduced falls short of the maximum amount which is not chargeable to income-tax and the tax on the balance of such long-term capital gains shall be computed at the rate of twenty per cent.;
(b) in the case of a domestic company,—
(i) the amount of income-tax payable on the total income as reduced by the amount of such long-term capital gains, had the total income as so reduced been its total income; and
(ii) the amount of income-tax calculated on such long-term capital gains at the rate of twenty per cent.;
(c) in the case of a non-resident (not being a company) or a foreign company,—
(i) the amount of income-tax payable on the total income as reduced by the amount of such long-term capital gains, had the total income as so reduced been its total income; and
(ii) the amount of income-tax calculated on long-term capital gains [except where such gain arises from transfer of capital asset referred to in sub-clause (iii)] at the rate of twenty per cent.; and
(iii) the amount of income-tax on long-term capital gains arising from the transfer of a capital asset, being unlisted securities or shares of a company not being a company in which the public are substantially interested, calculated at the rate of ten per cent. on the capital gains in respect of such asset as computed without giving effect to the first and second proviso to section 48;
(d) in any other case of a resident,—
(i) the amount of income-tax payable on the total income as reduced by the amount of long-term capital gains, had the total income as so reduced been its total income; and
(ii) the amount of income-tax calculated on such long-term capital gains at the rate of twenty per cent.
Provided that where the tax payable in respect of any income arising from the transfer of a long-term capital asset, being listed securities (other than a unit) or zero coupon bond, exceeds ten per cent. of the amount of capital gains before giving effect to the provisions of the second proviso to section 48, then, such excess shall be ignored for the purpose of computing the tax payable by the assessee:
It is proposed to substitute clauses (a), (b), (c), (d) and the first proviso of said section so as to provide that where the total income of an assessee includes any income, arising from the transfer of a long-term capital asset, which is chargeable under the head “Capital gains”, the tax payable by the assessee on the total income shall be the aggregate of,—
(a) in the case of an individual or a Hindu undivided family, being a resident,—
(i) the amount of income-tax payable on the total income as reduced by the amount of such long-term capital gains, had the total income as so reduced been his total income; and
(ii) the amount of income-tax calculated on such long-term capital gains,––
(A) at the rate of twenty per cent. for any transfer which takes place before the 23rd day of July, 2024; and
(B) at the rate of twelve and one-half per cent. for any transfer which takes place on or after the 23rd day of July, 2024:
Provided that where the total income as reduced by such long-term capital gains is below the maximum amount which is not chargeable to income-tax, then, such long-term capital gains shall be reduced by the amount by which the total income as so reduced falls short of the maximum amount which is not chargeable to income-tax and the tax on the balance of such long-term capital gains shall be computed at the rate as applicable in sub-clause (ii);
(b) in the case of a domestic company,—
(i) the amount of income-tax payable on the total income as reduced by the amount of such long-term capital gains, had the total income as so reduced been its total income; and
(ii) the amount of income-tax calculated on such long-term capital gains
(A) at the rate of twenty per cent. for any transfer which takes place before the 23rd day of July, 2024; and
(B) at the rate of twelve and one-half per cent. for any transfer which takes place on or after the 23rd day of July, 2024 :
(c) in the case of a non-resident (not being a company) or a foreign company,—
(i) the amount of income-tax payable on the total income as reduced by the amount of such long-term capital gains, had the total income as so reduced been its total income; and
(ii) the amount of income-tax calculated on such long-term capital gains
(A) at the rate of twenty per cent. for any transfer [other than transfer referred to in sub-clause (iii)] which takes place before the 23rd day of July, 2024; and
(B) at the rate of twelve and one-half per cent. for any transfer which takes place on or after the 23rd day of July, 2024:
(iii) the amount of income-tax on long-term capital gains arising from the transfer of a capital asset which takes place before the 23rd day of July, 2024, being unlisted securities or shares of a company not being a company in which the public are substantially interested, calculated at the rate of ten per cent. on the capital gains in respect of such asset as computed without giving effect to the first and second proviso to section 48;
(d) in any other case of a resident,—
(i) the amount of income-tax payable on the total income as reduced by the amount of long-term capital gains, had the total income as so reduced been its total income; and
(ii) the amount of income-tax calculated on such long-term capital gains,––
(A) at the rate of twenty per cent. for any transfer which takes place before the 23rd day of July, 2024; and
(B) at the rate of twelve and one-half per cent. for any transfer which takes place on or after the 23rd day of July, 2024:
Provided that where the tax payable in respect of any income arising from the transfer of a long-term capital asset which takes place before the 23rd day of July, 2024, being listed securities (other than a unit) or zero coupon bond, exceeds ten per cent of the amount of capital gains before giving effect to the provisions of the second proviso to section 48, then, such excess shall be ignored for the purpose of computing the tax payable by the assessee:
This amendment will take effect retrospectively from 23rd July, 2024.
Extract of Clause 31 of Finance Bill 2024
Clause 31 of the Bill seeks to amend section 112A of the Income-tax Act relating to tax on long-term capital gains in certain cases.
The sub-section (2) of said section, inter alia, provide that the tax payable by the assessee on the total income referred to in sub-section (1) of the section shall be the aggregate of—
(i) the amount of income-tax calculated on such long-term capital gains exceeding one lakh rupees at the rate of ten per cent.; and
(ii) the amount of income-tax payable on the total income as reduced by the amount of long-term capital gains referred to in sub-section (1) as if the total income so reduced were the total income of the assessee.
It is proposed to substitute clause (i) of the said sub-section, inter alia, so as to provide that the tax payable by the assessee on the total income referred to in sub-section (1) of the section shall be the aggregate of—
(i) the amount of income-tax calculated on such long-term capital gains exceeding one lakh twenty-five thousand rupees-
(a) on long-term capital gains at the rate of ten per cent. for any transfer which takes place before the 23rd day of July, 2024; and
(b) on long-term capital gains, at the rate of twelve and one-half per cent. for any transfer which takes place on or after the 23rd day of July, 2024;
Provided that the limit of one lakh twenty-five thousand rupees shall apply on aggregate of the long-term capital gains under sub-clause (a) and (b).
This amendment will take effect retrospectively from 23rd July, 2024.
Extract of Clause 33 of Finance Bill 2024
Clause 33 of the Bill seeks to amend section 115AB of the Income-tax Act relating to tax on income from units purchased in foreign currency or capital gains arising from their transfer.
The sub-section (1) of said section provides that where the total income of an assessee, being an overseas financial organisation (hereinafter referred to as Offshore Fund) includes—
(a) income received in respect of units purchased in foreign currency; or
(b) income by way of long-term capital gains arising from the transfer of units purchased in foreign currency,
the income-tax payable shall be the aggregate of—
(i) the amount of income-tax calculated on the income in respect of units referred to in clause (a), if any, included in the total income, at the rate of ten per cent.;
(ii) the amount of income-tax calculated on the income by way of long-term capital gains referred to in clause (b), if any, included in the total income, at the rate of ten per cent.; and
(iii) the amount of income-tax with which the Offshore Fund would have been chargeable had its total income been reduced by the amount of income referred to in clause (a) and clause (b).
It is proposed to substitute clause (ii) of said sub-section so as to provide that the amount of income-tax calculated on the income by way of long-term capital gains referred to in clause (b), if any, included in the total income, shall be at the rate of ten per cent. for any transfer which takes place before the 23rd day of July, 2024, and at the rate of twelve and one-half per cent. for any transfer which takes place on or after the 23rd day of July, 2024.
This amendment will take effect retrospectively from 23rd July, 2024.
Extract of Clause 34 of Finance Bill 2024
Clause 34 of the Bill seeks to amend section 115AC of the Income-tax Act relating to tax on income from bonds or Global Depository Receipts purchased in foreign currency or capital gains arising from their transfer.
The sub-section (1) of said section provides that where the total income of an assessee, being a non-resident, includes—
(a) income by way of interest on bonds of an Indian company issued in accordance with such scheme as the Central Government may, by notification in the Official Gazette, specify in this behalf, or on bonds of a public sector company sold by the Government, and purchased by him in foreign currency; or
(b) income by way of dividends on Global Depository Receipts—
(i) issued in accordance with such scheme as the Central Government may, by notification in the Official Gazette, specify in this behalf, against the initial issue of shares of an Indian company and purchased by him in foreign currency through an approved intermediary; or
(ii) issued against the shares of a public sector company sold by the Government and purchased by him in foreign currency through an approved intermediary; or
(iii) issued or re-issued in accordance with such scheme as the Central Government may, by notification in the Official Gazette, specify in this behalf, against the existing shares of an Indian company purchased by him in foreign currency through an approved intermediary;
(c) income by way of long-term capital gains arising from the transfer of bonds referred to in clause (a) or, as the case may be, Global Depository Receipts referred to in clause (b),
the income-tax payable shall be the aggregate of—
(i) the amount of income-tax calculated on the income by way of interest or dividends, as the case may be, in respect of bonds referred to in clause (a) or Global Depository Receipts referred to in clause (b), if any, included in the total income, at the rate of ten per cent.;
(ii) the amount of income-tax calculated on the income by way of long-term capital gains referred to in clause (c), if any, at the rate of ten per cent.; and
(iii) the amount of income-tax with which the non-resident would have been chargeable had his total income been reduced by the amount of income referred to in clauses (a), (b) and (c).
It is proposed to substitute clause (ii) of longline of said sub-section so as to provide that the amount of income-tax calculated on the income by way of long-term capital gains referred to in clause (c), if any, included in the total income, shall be at the rate of ten per cent for any transfer which takes place before the 23rd day of July, 2024 and at the rate of twelve and one-half per cent. for any transfer which takes place on or after the 23rd day of July, 2024.
This amendment will take effect retrospectively from 23rd July, 2024.
Extract of Clause 35 of Finance Bill 2024
Clause 35 of the Bill seeks to amend section 115ACA of the Income-tax Act relating to tax on income from Global Depository Receipts purchased in foreign currency or capital gains arising from their transfer.
The sub-section (1) of said section provides that where the total income of an assessee, being an individual, who is a resident and an employee of an Indian company engaged in specified knowledge based industry or service, or an employee of its subsidiary engaged in specified knowledge based industry or service (hereafter in this section referred to as the resident employee), includes—
(a) income by way of dividends on Global Depository Receipts of an Indian company engaged in specified knowledge based industry or service, issued in accordance with such Employees’ Stock Option Scheme as the Central Government may, by notification in the Official Gazette, specify in this behalf and purchased by him in foreign currency; or
(b) income by way of long-term capital gains arising from the transfer of Global Depository Receipts referred to in clause (a),
the income-tax payable shall be the aggregate of—
(i) the amount of income-tax calculated on the income by way of dividends in respect of Global Depository Receipts referred to in clause (a), if any, included in the total income, at the rate of ten per cent.;
(ii) the amount of income-tax calculated on the income by way of long-term capital gains referred to in clause (b), if any, at the rate of ten per cent.; and
(iii) the amount of income-tax with which the resident employee would have been chargeable had his total income been reduced by the amount of income referred to in clauses (a) and (b).
It is proposed to substitute clause (ii) of longline of said sub-section so as to provide that the amount of income-tax calculated on the income by way of long-term capital gains referred to in clause (b), if any, included in the total income, shall be at the rate of ten per cent. for any transfer which takes place before the 23rd day of July, 2024, and at the rate of twelve and one-half per cent. for any transfer which takes place on or after the 23rd day of July, 2024.
This amendment will take effect retrospectively from 23rd July, 2024.
Extract of Clause 36 of Finance Bill 2024
Clause 36 of the Bill seeks to amend section 115AD of the Income-tax Act relating to tax on income of Foreign Institutional Investors from securities or capital gains arising from their transfer.
The said section, inter alia, provides that where the total income of a specified fund or Foreign Institutional Investor includes income by way of short-term or long-term capital gains arising from the transfer of securities (other than units referred to in section 115AB of the Act), the income-tax payable shall be calculated as follows—
(i) the amount of income-tax calculated on the income by way of short-term capital gains, if any, included in the total income, at the rate of thirty per cent, provided that the amount of income-tax calculated on the income by way of short-term capital gains referred to in section 111A shall be at the rate of fifteen per cent;
(ii) the amount of income-tax calculated on the income by way of long-term capital gains, if any, included in the total income, at the rate of ten per cent, provided that in case of income arising from the transfer of a long-term capital asset referred to in section 112A, income-tax at the rate of ten per cent shall be calculated on such income exceeding one lakh rupees.
It is proposed to substitute proviso to clause of longline of said sub-section so as to provide that the amount of income-tax calculated on the income by way of short-term capital gains referred to in section 111A shall be at the rate of––
(a) fifteen per cent. for any transfer which takes place before the 23rd day of July, 2024; and
(b) twenty per cent. for any transfer which takes place on or after the 23rd day of July, 2024;
It is further proposed to substitute proviso to clause (iii) of longline of said sub-section so as to provide that in case of income arising from the transfer of a long-term capital asset referred to in section 112A which exceeds one lakh and twenty-five thousand rupees, income-tax shall be calculated at the rate of––
(a) ten per cent. where transfer of such asset takes place before the 23rd day of July, 2024; and
(b) twelve and one-half per. cent where transfer of such asset takes place on or after the 23rd day of July, 2024;
It is proposed to further provide that the limit of one lakh twenty-five thousand rupees mentioned shall apply on aggregate of the long-term capital gains referred to in clause (a) and (b).
These amendments will take effect retrospectively from 23rd July, 2024.
Extract of Clause 38 of Finance Bill 2024
Clause 38 of the Bill seeks to amend section 115E of the Income-tax Act relating to tax on investment income and long-term capital gains.
The said section provides that where the total income of an assessee, being a non-resident Indian, includes—
(a) any income from investment or income from long-term capital gains of an asset other than a specified asset;
(b) income by way of long-term capital gains,
the tax payable by him shall be the aggregate of—
(i) the amount of income-tax calculated on the income in respect of investment income referred to in clause (a), if any, included in the total income, at the rate of twenty per cent.;
(ii) the amount of income-tax calculated on the income by way of long-term capital gains referred to in clause (b), if any, included in the total income, at the rate of ten per cent.; and
(iii) the amount of income-tax with which he would have been chargeable had his total income been reduced by the amount of income referred to in clauses (a) and (b).
It is proposed to substitute clause (ii) of longline of said section so as to provide that the amount of income-tax calculated on the income by way of long-term capital gains referred to in clause (b), if any, included in the total income at the rate of ten per cent. for any transfer which takes place before the 23rd day of July, 2024 and at the rate of twelve and one-half per cent. for any transfer which takes place on or after the 23rd day of July, 2024.
This amendment will take effect retrospectively from 23rd July, 2024.
Extract of Clause 63 of Finance Bill 2024
Clause 63 of the Bill seeks to amend section 196B of the Income-tax Act relating to Income from units.
The said section provides that where any income in respect of units referred to in section 115AB or by way of long-term capital gains arising from the transfer of such units is payable to an Offshore Fund, the person responsible for making the payment shall, at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rate of ten per cent.
It is proposed to amend the said section so as to provide that where any income in respect of units referred to in section 115AB or by way of long-term capital gains arising from the transfer of such units is payable to an Offshore Fund, the person responsible for making the payment shall, at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rate of,-
(a) ten per cent.in respect of income from units referred to in clause (i) of subsection (1) of section 115AB;
(b) ten per cent.in respect of long-term capital gains arising from transfer of units referred to in section 115AB, which takes place before the 23rd day of July, 2024;
(c) twelve and one-half per cent in respect of long-term capital gains arising from transfer of units referred to in section 115AB, which takes place on or after the 23rd day of July, 2024.
This amendment will take effect retrospectively from 23rd July, 2024.
Extract of Clause 64 of Finance Bill 2024
Clause 64 of the Bill seeks to amend section 196C of the Income-tax Act relating to income from foreign currency bonds or shares of Indian company.
The said section provides that where any income by way of interest or dividends in respect of bonds or Global Depository Receipts referred to in section 115AC or by way of long-term capital gains arising from the transfer of such bonds or Global Depository Receipts is payable to a non-resident, the person responsible for making the payment shall, at the time of credit of such income to the account of the payee or at the time of payment thereof by any mode, whichever is earlier, deduct income-tax thereon at the rate of ten per cent.
It is proposed to amend the said section so as to provide that where any income by way of interest or dividends in respect of bonds or Global Depository Receipts referred to in section 115AC or by way of long-term capital gains arising from the transfer of such bonds or Global Depository Receipts is payable to a non-resident, the person responsible for making the payment shall, at the time of credit of such income to the account of the payee or at the time of payment thereof by any mode, whichever is earlier, deduct income-tax thereon at the rate of,––
(a) ten per cent. in respect of income by way of interest or dividends in respect of bonds or Global Depository Receipts referred to in section 115AC;
(b) ten per cent. in respect of long-term capital gains arising from transfer of such bond or Global Depository Receipts referred to in section 115AC which takes place before the 23rd day of July, 2024;
(c) twelve and one-half per cent. in respect of long-term capital gains arising from transfer of such bond or Global Depository Receipts referred to in section 115AC which takes place on or after the 23rd day of July, 2024.
This amendment will take effect retrospectively from 23rd July, 2024.
Proposed Amendment to Clause (42A) of the section 2 of Income Tax Act, 1961 vide Finance Bill, 2024
In Clause (42A) of the section 2 of the Income-tax Act, with effect from the 23rd day of July, 2024,––
(i) in the opening portion, for the words “thirty-six months”, the words “twenty-four months” shall be substituted and shall be deemed to have been substituted;
(ii) in the first proviso,––
(A) the brackets and words “(other than a unit)” shall be omitted and shall be deemed to have been omitted;
(B) for the words “thirty-six months”, the words “twenty-four months” shall be substituted and shall be deemed to have been substituted;
(iii) in the second proviso, after the words “had been substituted”, the words, brackets, letters and figures “as it
stood immediately prior to the commencement of the Finance (No.2) Act, 2024” shall be inserted and shall be deemed to have been inserted;
(iv) the third proviso shall be omitted and shall be deemed to have been omitted.
Proposed Amendment to section 48 of Income Tax Act, 1961 vide Finance Bill, 2024
In section 48 of the Income-tax Act, in the second proviso, after the words “where long-term capital gain arises from the transfer”, the brackets, words, figures and letters “(which takes place before the 23rd day of July, 2024)” shall be inserted and shall be deemed to have been inserted with effect from the 23rd day of July, 2024.
Proposed Amendment to section 50AA of Income Tax Act, 1961 vide Finance Bill, 2024
In section 50AA of the Income-tax Act,-
(a) for the portion beginning with the words “Notwithstanding anything contained in” and ending with the words “short-term capital asset:”, the following shall be substituted and shall be deemed to have been substituted with effect from the 23rd day of July, 2024, namely:––
“Notwithstanding anything contained in clause (42A) of section 2 or section 48, where the capital asset―
(a) is a unit of a Specified Mutual Fund acquired on or after the 1st day of April, 2023 or a Market Linked Debenture; or
(b) is an unlisted bond or an unlisted debenture which is transferred or redeemed or matures on or after the 23rd day of July, 2024,
the full value of consideration received or accruing as a result of the transfer or redemption or maturity of such debenture or unit or bond as reduced by—
(i) the cost of acquisition of the debenture or unit or bond; and
(ii) the expenditure incurred wholly and exclusively in connection with such transfer or redemption or maturity,
shall be deemed to be the capital gains arising from the transfer of a short-term capital asset:”;
(b) in the Explanation, for clause (ii), the following clause shall be substituted with effect from the 1st day of April, 2026, namely:––
‘(ii) “Specified Mutual Fund” means,––
(a) a Mutual Fund by whatever name called, which invests more than sixty-five per cent. of its total proceeds in debt and money market instruments; or
(b) a fund which invests sixty-five per cent. or more of its total proceeds in units of a fund referred to in sub-clause (a):
Provided that the percentage of investment in debt and money market instruments or in units of a fund, as the case may be, in respect of the Specified Mutual Fund, shall be computed with reference to the annual average of the daily closing figures:
Provided further that for the purposes of this clause, “debt and money market instruments” shall include any securities, by whatever name called, classified or regulated as debt and money market instruments by the Securities and Exchange Board of India.’.
Proposed Amendment to section 111A of Income Tax Act, 1961 vide Finance Bill, 2024
In section 111A of the Income-tax Act, in sub-section (1) with effect from the 23rd day of July, 2024,––
(a) for the long line occurring before the first proviso, the following shall be substituted and shall be deemed to have been substituted with effect from the 23rd day of July, 2024, namely:––
“the tax payable by the assessee on the total income shall be the aggregate of—
(i) the amount of income-tax calculated on such short-term capital gains––
(a) at the rate of fifteen per cent. for any transfer which takes place before the 23rd day of July, 2024; and
(b) at the rate of twenty per cent. for any transfer which takes place on or after the 23rd day of July, 2024;
(ii) the amount of income-tax payable on the balance amount of the total income as if such balance amount were the total income of the assessee:”;
(b) in the first proviso, for the words “rate of fifteen per cent.”, the words, brackets and figure “rate as applicable in clause (i)” shall be substituted and shall be deemed to have been substituted.
Proposed Amendment to section 112 of Income Tax Act, 1961 vide Finance Bill, 2024
In section 112 of the Income-tax Act, in sub-section (1), for the clauses (a), (b), (c), (d) and the first proviso, the following shall be substituted and shall be deemed to have been substituted with effect from the 23rd day of July, 2024, namely:―
“(a) in the case of an individual or a Hindu undivided family, being a resident,—
(i) the amount of income-tax payable on the total income as reduced by the amount of such long-term capital gains, had the total income as so reduced been his total income; and
(ii) the amount of income-tax calculated on such long-term capital gains,––
(A) at the rate of twenty per cent. for any transfer which takes place before the 23rd day of July, 2024; and
(B) at the rate of twelve and one-half per cent. for any transfer which takes place on or after the 23rd day of July, 2024:
Provided that where the total income as reduced by such long-term capital gains is below the maximum amount which is not chargeable to income-tax, then, such long-term capital gains shall be reduced by the amount by which the total income as so reduced falls short of the maximum amount which is not chargeable to income-tax and the tax on the balance of such long-term capital gains shall be computed at the rate as applicable in sub-clause (ii);
(b) in the case of a domestic company,—
(i)the amount of income-tax payable on the total income as reduced by the amount of such long-term capital gains, had the total income as so reduced been its total income; and
(ii) the amount of income-tax calculated on such long-term capital gains,––
(A) at the rate of twenty per cent. for any transfer which takes place before the 23rd day of July, 2024; and
(B) at the rate of twelve and one-half per cent. for any transfer which takes place on or after the 23rd day of July, 2024;
(c) in the case of a non-resident (not being a company) or a foreign company,—
(i) the amount of income-tax payable on the total income as reduced by the amount of such long-term capital gains, had the total income as so reduced been its total income; and
(ii) the amount of income-tax calculated on such long-term capital gains, __
(A) at the rate of twenty per cent. for any transfer [other than a transfer referred to in sub-clause (iii)] which takes place before the 23rd day of July, 2024; and
(B) at the rate of twelve and one-half per cent. for any transfer which takes place on or after the 23rd day of July, 2024;
(iii) the amount of income-tax on long-term capital gains arising from the transfer of a capital asset which takes place before the 23rd day of July, 2024, being unlisted securities or shares of a company not being a company in which the public are substantially interested, calculated at the rate of ten per cent. on the capital gains in respect of such asset as computed without giving effect to the first and second proviso to section 48;
(d) in any other case of a resident,—
(i) the amount of income-tax payable on the total income as reduced by the amount of long-term capital gains, had the total income as so reduced been its total income; and
(ii) the amount of income-tax calculated on such long-term capital gains,––
(A) at the rate of twenty per cent. for any transfer which takes place before the 23rd day of July, 2024; and
(B) at the rate of twelve and one-half per cent. for any transfer which takes place on or after the 23rd day of July, 2024:
Provided that where the tax payable in respect of any income arising from the transfer of a long-term capital asset which takes place before the 23rd day of July, 2024, being listed securities (other than a unit) or zero coupon bond, exceeds ten per cent. of the amount of capital gains before giving effect to the provisions of the second proviso to section 48, then, such excess shall be ignored for the purpose of computing the tax payable by the assessee :”.
Proposed Amendment to section 112A of Income Tax Act, 1961 vide Finance Bill, 2024
In section 112A of the Income-tax Act, in sub-section (2), for clause (i) the following shall be substituted and shall be deemed to have been substituted with effect from the 23rd day of July, 2024, namely:––
“(i) the amount of income-tax calculated on such long-term capital gains exceeding one lakh twenty-five thousand rupees––
(a) on long-term capital gains at the rate of ten per cent. for any transfer which takes place before the 23rd day of July, 2024; and
(b) on long-term capital gains, at the rate of twelve and one-half per cent. for any transfer which takes place on or after the 23rd day of July, 2024:
Provided that the limit of one lakh twenty-five thousand rupees shall apply on aggregate of the long- term capital gains under sub-clauses (a) and (b);”.
Proposed Amendment to section 115AB of Income Tax Act, 1961 vide Finance Bill, 2024
In section 115AB of the Income-tax Act, in sub-section (1), in the longline, for clause (ii), the following clause shall be substituted and shall be deemed to have been substituted with effect from the 23rd day of July, 2024, namely:––
“(ii) the amount of income-tax calculated on the income by way of long-term capital gains referred to in clause (b), if any, included in the total income,––
(A) at the rate of ten per cent. for any transfer which takes place before the 23rd day of July, 2024; and
(B) at the rate of twelve and one-half per cent. for any transfer which takes place on or after the 23rd day of July, 2024: and”.
Proposed Amendment to section 115AC of Income Tax Act, 1961 vide Finance Bill, 2024
In section 115AC of the Income-tax Act, in sub-section (1), in the long line, for clause (ii), the following clause shall be substituted and shall be deemed to have been substituted with effect from the 23rd day of July, 2024, namely:––
“(ii) the amount of income-tax calculated on the income by way of long-term capital gains referred to in clause (c), if any, included in the total income, –
(A) at the rate of ten per cent. for any transfer which takes place before the 23rd day of July, 2024; and
(B) at the rate of twelve and one-half per cent. for any transfer which takes place on or after the 23rd day of July, 2024; and”.
Proposed Amendment to section 115ACA of Income Tax Act, 1961 vide Finance Bill, 2024
In section 115ACA of the Income-tax Act, in sub-section (1), in the longline, for clause (ii), the following clause shall be substituted and shall be deemed to have been substituted with effect from the 23rd day of July, 2024, namely:––
“(ii) the amount of income-tax calculated on the income by way of long-term capital gains referred to in clause (b), if any, included in the total income,––
(A) at the rate of ten per cent. for any transfer which takes place before the 23rd day of July, 2024; and
(B) at the rate of twelve and one-half per cent. for any transfer which takes place on or after the 23rd day of July, 2024; and”.
(B) at the rate of twelve and one-half per cent. for any transfer which takes place on or after the 23rd day of July, 2024; and”.
Proposed Amendment to section 115AD of Income Tax Act, 1961 vide Finance Bill, 2024
In section 115AD of the Income-tax Act, in sub-section (1) with effect from the 23rd day of July, 2024,––
(a) in the longline, in clause (ii), for the proviso, the following proviso shall be substituted and shall be deemed to have been substituted, namely:––
“Provided that the amount of income-tax calculated on the income by way of short-term capital gains referred to in section 111A shall be at the rate of––
(A) fifteen per cent. for any transfer which takes place before the 23rd day of July, 2024; and
(B) twenty per cent. for any transfer which takes place on or after the 23rd day of July, 2024;”
(b) in clause (iii), for the proviso, the following provisos shall be substituted and shall be deemed to have been substituted, namely:––
“Provided that in case of income arising from the transfer of a long-term capital asset referred to in section 112A which exceeds one lakh and twenty-five thousand rupees, income-tax shall be calculated at the rate of––
(A) ten per cent. where transfer of such asset takes place before the 23rd day of July, 2024; and
(B) twelve and one-half per cent. where transfer of such asset takes place on or after the 23rd day of July, 2024:
Provided further that the limit of one lakh twenty-five thousand rupees mentioned in the first proviso shall apply on aggregate of the long-term capital gains referred to in clauses (A) and (B); and”.
Proposed Amendment to section 115E of Income Tax Act, 1961 vide Finance Bill, 2024
In section 115E of the Income-tax Act, in the longline, for clause (ii), the following clause shall be substituted and shall be deemed to have been substituted with effect from the 23rd day of July, 2024, namely:––
“(ii) the amount of income-tax calculated on the income by way of long-term capital gains referred to in clause (b), if any, included in the total income,––
(A) at the rate of ten per cent. for any transfer which takes place before the 23rd day of July, 2024; and
(B) at the rate of twelve and one-half per cent. for any transfer which takes place on or after the 23rd day of July, 2024; and”.
Proposed Amendment to section 196B of Income Tax Act, 1961 vide Finance Bill, 2024
In section 196B the Income-tax Act, for the words “at the rate of ten per cent.”, the following shall be substituted and shall be deemed to have been substituted with effect from the 23rd day of July, 2024, namely:–
“at the rate of––
(a) ten per in respect of income from units referred to in clause (i) of sub-section (1) of section 115AB;
(b) ten per in respect of long-term capital gains arising from transfer of units referred to in section 115AB, which takes place before the 23rd day of July, 2024;
(c) twelve and one-half per cent. in respect of long-term capital gains arising from transfer of units referred to in section 115AB, which takes place on or after the 23rd day of July, 2024.”.
Proposed Amendment to section 196C of Income Tax Act, 1961 vide Finance Bill, 2024
In section 196C of the Income-tax Act, for the words “at the rate of ten per cent.”, the following shall be substituted and shall be deemed to have been substituted with effect from the 23rd day of July, 2024, namely:––
“at the rate of––
(a) ten per cent. in respect of income by way of interest or dividends in respect of bonds or Global Depository Receipts referred to in section 115AC;
(b) ten per cent. in respect of long-term capital gains arising from transfer of such bond or Global Depository Receipts referred to in section 115AC which takes place before the 23rd day of July, 2024;
(c) twelve and one-half per cent. in respect of long-term capital gains arising from transfer of such bond or Global depository Receipts referred to in section 115AC which takes place on or after the 23rd day of July, 2024.”.
