NEW CAPITAL GAINS RULES AND UPDATES FROM BUDGET 2024
Income Tax Department Clarifies New Capital Gains Tax Rules
The Income Tax Department has clarified important aspects of the new capital gains tax regime, especially concerning properties purchased before April 1, 2001. Taxpayers can choose between two methods for calculating the cost of acquisition for such properties:
Original Cost of Acquisition: Use the price at which the property was originally purchased.
Fair Market Value (FMV) as of April 1, 2001: Alternatively, use the FMV as of this date, provided it does not exceed the stamp duty value.
This clarification addresses the removal of indexation benefits for properties bought after April 1, 2001, ensuring a fair assessment of long-term capital gains.
Updates from Budget 2024:
Indexation Benefits: For properties bought till April 1, 2001, indexation benefits will continue. Tax will be calculated using the lower of the original cost plus indexation or the FMV as of April 1, 2001. For properties bought after April 1, 2001, the tax rate is set at 12.5% without indexation.
Long-Term Capital Gains (LTCG): The tax rate on the sale of listed equity shares, equity-oriented mutual funds, and business trusts (Section 112A) has increased from 10% to 12.5%.
For all other long-term capital assets (Section 112), the tax rate has been reduced from 20% to 12.5%, and indexation benefits have been removed.
Short-Term Capital Gains (STCG): The tax rate on gains from the sale of listed equity shares, equity-oriented mutual funds, and business trusts (Section 111A) has been increased from 15% to 20%.
Exemption Limit: The exemption limit for long-term capital gains on listed equity has been increased from Rs.1 lakh to Rs.1.25 lakh.
Holding Periods: The holding period for listed securities has been simplified to one year, while other assets require a holding period of two years.
Roll Over Benefits: No changes have been made; taxpayers can continue to avail themselves of roll over benefits as per the existing provisions of the Income Tax Act.
These updates will take effect from July 23, 2024. The clarifications and changes aim to provide clarity and ensure a fair and manageable approach to capital gains taxation under the new rules.
