New Capital Gains Tax Rules Announced, CBDT Issues FAQs For Clarity

Pune, 26th July 2024: The Union Budget 2024 has introduced significant changes to the capital gains tax rules, effective from July 23, 2024. These changes, announced by Finance Minister Nirmala Sitharaman, aim to simplify the tax system and have raised several questions among taxpayers. To address these queries, the Central Board of Direct Taxes (CBDT) has released a detailed FAQ, providing comprehensive information on the new rules.

The capital gains tax, levied on profits from any property or asset, now follows simplified guidelines. The holding tenure has been reduced to two periods (1 year and 2 years) for different assets. Additionally, the calculation rate has been increased from 12.5% to 20%. These changes also aim to bring parity between residents and non-residents of India, with no modifications to the rollover benefits.

The new rules came into effect on July 23, 2024, impacting all transfers made after this date. The holding tenure changes reduce the periods for listed securities to one year and for unlisted securities to two years. This adjustment benefits investors by shortening the holding period for business trusts from 36 months to 12 months and for unlisted securities from 36 months to 24 months. The holding period for real estate and unlisted shares remains unchanged at 24 months.

The short-term capital gains (STCG) rates for STT-paid listed equity, equity-oriented mutual funds, and business trust units have been increased from 15% to 20%. The long-term capital gains (LTCG) tax rate has been reduced from 20% to 12.5% to simplify the tax system. The exemption limit for LTCG tax has also been increased from ₹1 lakh to ₹1.25 lakh, applicable from the fiscal year 2024-25 onwards.

Investors will continue to receive rollover benefits, with no changes in this regard. These benefits are available under Sections 54, 54B, 54D, 54EC, 54F, and 54G of the Income Tax Act. Under Section 54EC, a rollover benefit of up to ₹50 lakh is available, subject to specified conditions.