CBDT explains Budget proposal on capital gains tax

The Budget, through the Finance Bill, has proposed a rationalisation and simplification of the taxation of capital gains.

Finance Bill, 2024 prescribes five broad parameters, which , include the holding period, rate structure, parity between resident and non-resident, rollover benefits, date of implementation etc.

Holding period has been simplified with only two holding periods of 1 year and 2 years only.

Indexation has been done away with for ease of computation and rates have been reduced from 20 per cent to 12.5 per cent 

Budget also proposes parity between resident and non-resident for tax purposes. There is also no change in roll over benefits.

The new provisions for taxation of capital gains come into force from 23 July 2024 and shall apply to any transfer made on or after 23 July.2024.

The holding period of assets has been incorporated to make for a shorter period of one year and all others to include two years and above.

As the holding period of all listed assets will be now one year,  for listed units of business trusts (ReITs, InVITs) holding period is reduced from 36 months to 12 months. The holding period of gold, unlisted securities (other than unlisted shares) is also  The holding period of immovable property and unlisted shares remains unchanged at  24 months.

The tax rate for short-term STT paid listed equity, equity oriented mutual fund and units of business trusts has been increased from 15 per cent to 20 per cent. For long term, these assets will be charged at 12.5 per cent against 10per cent earlier.

The exemption limit of 1 lakh for LTCG on these assets has now been increased to 1.25 lakh, effective this fiscal.

The rate for other long-term capital gains on all assets stands reduced to 12.5 per cent from 20 per cent earlier.

The reduction in the rate will benefit all category of assets. In most of the cases, the taxpayers will benefit substantially. But in some cases the gains will be limited by inflation of the benefit will be absent.

There is no change in roll over benefits already available under the IT Act and taxpayers can continue to avail the roll over benefits on meeting applicable conditions.

Exemption from capital gains tax can be obtained on investment of Rs50 lakh of such gains tal gain in 54EC bonds  and in other cases, subject to certain specified conditions.