Budget 2024 made significant changes to capital gains taxation in India that every investor needs to understand. Short-term capital gains on equity were raised from 15% to 20%. Long-term capital gains on equity kept the 10% rate but the exemption limit stayed at ₹1.25 lakh. Property gains moved to a flat 12.5% — but indexation (the inflation adjustment benefit) was removed. Here's the complete picture.
Budget 2024 Changes at a Glance
- STCG on listed equity / equity MF: raised from 15% → 20%
- LTCG on property: removed indexation benefit; flat rate now 12.5%
- LTCG on equity: rate stayed at 10%, but exemption raised to ₹1.25 lakh
- Holding period for LTCG on unlisted shares: changed from 36 months to 24 months
Short-Term vs Long-Term: Holding Periods
| Asset Type | LTCG Threshold | STCG Rate | LTCG Rate |
|---|---|---|---|
| Listed equity shares / Equity MF | 12 months | 20% | 10%* |
| *exempt up to ₹1.25L per year | |||
| Immovable property (land/building) | 24 months | Slab rate | 12.5% |
| Unlisted shares | 24 months | Slab rate | 12.5% |
| Debt MF / Bonds (post Apr 2023) | N/A | Slab rate (always) | |
4% Health & Education Cess applies on all capital gains tax. Surcharge may apply on high gains.
Worked Example 1 — LTCG on Equity Mutual Funds
Scenario: Invested ₹5,00,000 in equity mutual fund 2 years ago. Current value ₹8,00,000. Gain = ₹3,00,000.
Long-term gain (held 12+ months): ₹3,00,000
Exemption: ₹1,25,000
Taxable LTCG: ₹3,00,000 − ₹1,25,000 = ₹1,75,000
Tax at 10%: ₹17,500
4% Cess: ₹700
Total CGT = ₹18,200
Worked Example 2 — STCG on Stocks
Scenario: Bought shares for ₹2,00,000 in February, sold in August for ₹2,70,000. Held less than 12 months. Gain = ₹70,000.
STCG rate: 20%
Tax: ₹70,000 × 20% = ₹14,000
4% Cess: ₹560
Total CGT = ₹14,560
Note: The ₹1.25L exemption does NOT apply to STCG.
Worked Example 3 — LTCG on Property (Post Budget 2024)
Scenario: Bought flat in 2018 for ₹40,00,000. Sold in 2025 for ₹75,00,000. Held 7 years (qualifies as LTCG).
Pre-Budget 2024 (with indexation):
Cost Inflation Index 2018-19 = 280, 2024-25 = 363.
Indexed cost = ₹40L × (363/280) = ₹51,86,000
LTCG = ₹75L − ₹51.86L = ₹23,14,000. Tax at 20% = ₹4,62,800
Post-Budget 2024 (no indexation, 12.5%):
LTCG = ₹75L − ₹40L = ₹35,00,000. Tax at 12.5% = ₹4,37,500
In this case, new regime saves ₹25,300 — but for properties held very long or with high inflation, old indexation could have been better.
Note: For properties bought before July 23, 2024, a transitional provision allows you to choose between 20% with indexation and 12.5% without, for properties held before that date.
Section 54: LTCG Exemption on Reinvestment
You can avoid LTCG tax on property if you reinvest the gains:
- Section 54: Reinvest LTCG from one residential property into another residential property (buy 1 year before or 2 years after sale, or construct within 3 years). Max exemption for 2 houses if gain ≤ ₹2 crore (one-time option).
- Section 54EC: Invest LTCG in specified bonds (NHAI, REC) within 6 months of sale. Max ₹50 lakh per year. Lock-in: 5 years.
- Section 54F: Reinvest entire sale proceeds (not just gains) from any long-term asset (not property) into a residential house.
Tax-Loss Harvesting in India
Capital losses can be set off against capital gains:
- Short-term capital loss can be set off against both STCG and LTCG.
- Long-term capital loss can only be set off against LTCG — not against STCG.
- Unabsorbed losses can be carried forward for 8 assessment years.
At the end of March each year, many investors book losses strategically to offset gains. If you have LTCG of ₹5L and LTCL of ₹2L, your taxable LTCG is only ₹3L (then apply ₹1.25L exemption → taxable ₹1.75L).
Surcharge on Capital Gains
High gains also attract surcharge. For LTCG under Section 112A (equity) and STCG under Section 111A (equity), the maximum surcharge is capped at 15% — even if your total income is very high. This cap does NOT apply to LTCG on property.
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Source: Finance Act 2024, Income Tax Department India. Rates applicable from July 23, 2024 (Budget 2024). Not financial advice. Consult a CA for individual circumstances.