Capital gains taxation in India changed significantly with the Union Budget 2024. With revised holding periods, new tax rates, and the removal of indexation for most assets, investors need to update their understanding — and their tax planning strategy.
Budget 2024 key change: LTCG tax on equity increased from 10% to 12.5%. STCG on equity increased from 15% to 20%. Indexation benefit removed for real estate LTCG (flat 12.5% rate applies).
Short-Term vs Long-Term: The Holding Period Rules
| Asset Type | Short-Term (STCG) | Long-Term (LTCG) | LTCG Exemption Limit |
|---|---|---|---|
| Listed equity shares | < 12 months | ≥ 12 months | ₹1.25 lakh/year |
| Equity mutual funds | < 12 months | ≥ 12 months | ₹1.25 lakh/year |
| Debt mutual funds (post Apr 2023) | Always STCG | — | — |
| Real estate | < 24 months | ≥ 24 months | None (reinvestment options under 54/54F) |
| Unlisted shares | < 24 months | ≥ 24 months | None |
Tax Rates (Post-Budget 2024)
| Asset | STCG Rate | LTCG Rate |
|---|---|---|
| Listed equity / equity MF | 20% | 12.5% (above ₹1.25L) |
| Debt MF / FD / other | Slab rate | Slab rate |
| Real estate | Slab rate | 12.5% (no indexation) |
| Gold / physical assets | Slab rate | 12.5% (no indexation) |
Tax-Loss Harvesting: A Legal Way to Reduce Tax
Tax-loss harvesting means intentionally selling investments that are in a loss to offset gains you've made elsewhere, reducing your taxable capital gains.
- Sell loss-making equity positions before March 31st
- The loss offsets your gains in the same year (STCG offsets STCG first, then LTCG)
- Losses can be carried forward for 8 assessment years
- You can re-buy the same stock or fund the next day — there's no "wash sale" rule in India
💡 Example: You have ₹3L LTCG from selling equity. You also have ₹1.5L unrealised loss in another fund. Selling that fund before year-end reduces your taxable LTCG to ₹1.5L — which is entirely within the ₹1.25L exemption after setting off, saving you ~₹28,000 in tax.
ITR Form for Capital Gains
If you have any capital gains, you cannot file ITR-1 (Sahaj). You must use ITR-2 (for individuals without business income) or ITR-3 (if you also have business income). This is one of the most common ITR form mistakes.
Real Estate Capital Gains — Special Rules
- Section 54: Reinvest gains from residential house into another residential house — exemption available
- Section 54F: Sell any asset, reinvest entire sale proceeds into residential house — exemption on proportionate gains
- Section 54EC: Reinvest up to ₹50L in specified bonds (NHAI, REC) — exemption for 5 years
⚠ Important: From Budget 2024, real estate LTCG is taxed at flat 12.5% without indexation. The option to use 20% with indexation has been removed. Recalculate your real estate tax planning accordingly.
Key Takeaways for Investors
- LTCG on equity is now 12.5% (up from 10%); ₹1.25L annual exemption
- STCG on equity is now 20% (up from 15%)
- Debt MF gains are always taxed at slab rate (no LTCG benefit)
- Indexation removed for real estate and gold (flat 12.5%)
- Use tax-loss harvesting before March 31st every year
- File ITR-2 or ITR-3 if you have any capital gains
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