What you need to know to dodge the punches

Decoding long-term capital gains (ltcg)

If you sold a stock or property for more than the price at which you bought it, congratulations! You made a profit or a capital gain — but the taxman will also get a share. Capital gains from sale of listed securities in India held for over 12 months are considered long-term capital gains (LTCG). For unlisted shares, immovable property and other assets, the holding period to qualify for LTCG has been kept uniform, of over 24 months, per proposals in Budget 2024 .

It has also been announced that long-term capital gains on sale of all listed financial and non-financial assets will now attract a uniform tax rate of 12.5 per cent (with effect from July 23, 2024). One of the key highlights of the proposed reforms is that indexation benefit will no longer be available for any long-term capital asset (barring properties acquired prior to 2001).

Short-term capital gains (stcg)

Budget 2024 has increased the tax rate on short-term capital gains for listed equity shares and equity-oriented mutual funds (scrips held for less than 12 months are short-term assets) to 20 per cent from the current rate of 15 per cent (with effect from July 23, 2024). Short-term capital gains on sale of other financial assets will be taxed at applicable rates.

Gains from STT-paid equity shares, units of equity-oriented mutual funds and units of business trust, held for up to 12 months are considered STCG. However, for all other types of capital assets, the holding period will now be 24 months or less, to be eligible for treatment as STCG.



Set-off provisions for capital losses

• Loss on a long-term capital asset can only be set off against gains from another long-term capital asset in the same year. A long-term capital loss cannot be set off against short-term capital gains.

• Loss from transferring a short-term capital asset can be set off against gains from any other capital asset in the same year.

• Any remaining capital losses can be carried forward for the next eight years and utilised in the same way as described above.

• However, to be able to carry forward any losses, make sure to file your income tax return on or before the due date.