MoneyWiseGuide
Effective July 23, 2024:
Calculate tax with automatic indexation for old regime
Sale - Purchase - Expenses
After tax
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With indexation for old regime
| Asset | Period | LTCG | STCG | Exemption | Index (Old) |
|---|---|---|---|---|---|
| Equity (Listed) | 12 mo | 12.5% | 20% | ₹1.25L | N/A |
| Equity MF | 12 mo | 12.5% | 20% | ₹1.25L | N/A |
| REITs/InVITs | 12 mo | 12.5% | 20% | ₹1.25L | N/A |
| Real Estate | 24 mo | 12.5% | Slab | - | ✓ |
| Gold | 24 mo | 12.5% | Slab | - | ✓ |
| Debt MF | 36 mo | 12.5% | Slab | - | ✓ |
Indexation applies only before July 23, 2024 (old regime). Yellow rows show eligible assets.
Short-term capital gains (STCG) apply when you sell assets held for less than the specified holding period (12 months for equity/equity mutual funds, 24 months for real estate/gold, 36 months for debt funds). Long-term capital gains (LTCG) apply to assets held beyond these periods. STCG is typically taxed at higher rates than LTCG, making holding period crucial for tax planning.
For equity shares and equity mutual funds: STCG is taxed at 20% (increased from 15%), and LTCG above ₹1.25 lakh is taxed at 12.5% (increased from 10%). For all other assets including real estate, gold, and debt funds: LTCG is taxed at 12.5% (reduced from 20%) without indexation benefit. STCG on non-equity assets is added to income and taxed as per slab rates.
Budget 2024-25 removed indexation benefit for LTCG on all assets acquired after July 23, 2024. However, taxpayers can choose between old regime (20% with indexation) or new regime (12.5% without indexation) for properties bought before July 23, 2024. For debt funds, real estate, and gold bought post-July 23, 2024, only 12.5% flat rate applies without indexation.
Budget 2024-25 increased the LTCG exemption limit for equity shares, equity mutual funds, and units of business trust from ₹1 lakh to ₹1.25 lakh per financial year. This means the first ₹1.25 lakh of long-term capital gains on listed equity is completely tax-free. Only gains exceeding ₹1.25 lakh are taxed at 12.5%.
Short-term capital losses can be set off against both short-term and long-term capital gains in the same year. Long-term capital losses can only be set off against long-term capital gains. Losses not fully adjusted can be carried forward for 8 consecutive years and set off against future capital gains. File ITR on time to preserve carry-forward rights.
Section 54 allows exemption from LTCG tax on residential property sale if you reinvest proceeds in another residential property within specified timelines (1 year before or 2 years after sale, or 3 years for construction). Section 54F provides similar benefits when selling any long-term asset (other than residential property) to buy residential property. These exemptions remain valid even after Budget 2024-25 changes.
Despite STCG increasing to 20% and LTCG to 12.5%, equity remains tax-efficient with ₹1.25 lakh annual exemption. Don't make investment decisions purely on tax changes. Focus on your financial goals, asset allocation, and investment horizon. Tax-loss harvesting can help offset gains, and holding for long-term (>12 months) still provides significant tax benefits over STCG.
Capital Gain = Sale Price - (Purchase Price + Improvement Cost + Sale Expenses). For assets bought before July 23, 2024, you can choose grandfathering (old indexation rules till July 2024). For equity: no indexation ever applied. For property/gold/debt bought after July 23, 2024: use actual cost without indexation adjustment, then apply 12.5% tax rate. Include all transaction costs as expenses.