The Indian government has created a tax system in which you are required to pay tax on almost every earnings from eligible sources. If you are renting out your flat, you are required to add the rent earnings to your total income, along with any other earnings in a financial year. In the end, if the total amount is higher than Rs. 2.5 lakh (old tax regime) or Rs. 3 lakh (new tax regime), you are liable to pay an income tax based on the applicable slabs. Investors who invest in various securities are also subject to taxes on the profits they earn from investing. The tax is called capital gains tax and is based on the holding period for the securities.
 

If you are a stock market investor, it is important to know about the capital gains tax amendments in Budget 2024. This blog will serve as a detailed guide to capital gains tax in 2024.

• Capital gains tax is a tax levied on the profit made from the sale of a capital asset, like property or stocks.
• In Budget 2024, the Finance Minister made numerous amendments and changed the capital gains tax rates.
• The holding periods were also reduced from three to two, with 24 months being the highest currently.

Capital gains tax in India refers to the tax imposed on the profit or gain arising from selling a capital asset, such as property, stocks, mutual funds, or bonds. The tax is categorised into short-term capital gains (STCG) and long-term capital gains (LTCG), depending on the asset's holding period. Finance Minister Nirmala Sitharaman amended the STCG and LTCG tax rate and holding periods in Budget 2024.

Here are the two types of capital gains tax in 2024:

• Short-term capital gain tax: It is the tax on gains or profits earned from holding a capital asset for less than 12 months (listed securities) and 24 months for any other security or asset. The previous 36-month period has been removed. The new STCG tax rate has been increased from 15% to 20% for most assets without indexation.
  
  
• Long-term capital gains tax: It is the tax on gains or profits earned from holding a capital asset for more than 12 months (listed securities) and 24 months for any other security or asset. The exemption limit is now Rs. 1.25 lakh, which has increased from Rs. 1 lakh, and the tax rate has increased from 10% to 12.5% without indexation. 

Listed below are the new holding periods for capital assets:

Here are the three factors included in capital gains calculation:
 

• Full value consideration: The amount received by the seller against selling a capital asset.
• Cost of acquisition: The value of the capital asset at the time of acquisition by the seller.
• Cost of improvement: The cost included in improving the capital asset by the seller.
   

However, in Budget 2024, indexation benefits have been removed.

The Income Tax Department allows taxpayers to claim some tax exemptions on capital gains under the following sections:

• Section 54: It provides a tax deduction when long-term capital gains (LTCG) arise from the sale of a residential property. The exemption is available if the gains are reinvested in another residential property within 2 years of purchase and 3 years of construction.
• Section 54F: It provides a tax deduction when LTCGs arise from the sale of any capital asset other than a residential property. The entire sale consideration (not just the capital gains) must be reinvested in a new residential property.
• Section 54C: It provides a tax deduction when LTCGs arise from the sale of land, building or both and the capital gains are reinvested within 6 months in specified bonds. 

The Income Tax Department designed the capital gains tax in India to allow the Indian government to earn tax income from the sale of capital assets. The tax rates and holding periods vary based on the type of asset and whether the gains are classified as short-term or long-term. Now that you know the new capital gain tax rate, you can better adhere to all the taxation laws.
 

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