Capital gains are the profits you earn when you sell an asset—such as stocks, bonds, mutual funds, or real estate—for more than its purchase price.
The tax treatment depends on how long you held the asset before selling it. Broadly, gains are classified as Long-Term Capital Gains (LTCG) or Short-Term Capital Gains (STCG).
1️. Long-Term Capital Gains (LTCG)
Long-term capital gains arise when you sell an asset after holding it for the specified “long-term” period (commonly 12 or 24 months, depending on the asset).
Latest Tax Rates (after Union Budget 2024)
Period of Sale | LTCG Tax Rate* | Annual Exemption Limit |
Up to 22 July 2024 | 10% | ₹1,25,000 |
On or after 23 July 2024 | 12.5% | ₹1,25,000 |
*Plus applicable surcharge and cess.
Example:
If you sell listed equity on 15 June 2024, the LTCG rate is 10% and the exemption limit is ₹1,25,000 (new limit effective 1 April 2024).
A sale on 25 July 2024 is taxed at 12.5% after the same exemption.
Grandfathering Clause for Equity
Before 1 April 2018, LTCG on listed equity shares and equity-oriented mutual funds was fully exempt.
To protect gains accrued under the old regime, the government introduced a grandfathering rule:
- For assets bought before 1 February 2018, you may treat the higher of
- actual purchase price or
- the Fair Market Value (FMV) on 31 January 2018
as your cost of acquisition (limited to the sale price).
Illustration
- Purchase Price (Jan 2015): ₹500
- FMV on 31 Jan 2018: ₹700
- Sale Price (Aug 2024): ₹1,000
- Taxable LTCG: ₹1,000 – ₹700 = ₹300
If sold for ₹650, you cannot claim a loss. The cost is restricted to the sale price (₹650), making the transaction tax-neutral.
2️. Short-Term Capital Gains (STCG)
Gains from selling securities within one year (or the specified shorter period) are treated as short-term.
Period of Sale | STCG Tax Rate* | Exemption |
Up to 22 July 2024 | 15% | No exemption |
On or after 23 July 2024 | 20% | No exemption |
*Plus applicable surcharge and cess.
3️ Holding Periods & Rates by Asset Class
(for sales on or after 23 July 2024)
Asset Type | Long-Term if Held > | LTCG Rate | STCG Rate |
Listed equity shares & equity ETFs | 12 months | 12.5% | 20% |
Gold/Silver ETFs | 12 months | 12.5% | Slab rate |
Listed bonds/debentures | 12 months | 12.5% | Slab rate |
Listed REIT/InvIT | 12 months | 12.5% | 20% |
Unlisted equity shares | 24 months | 12.5% | Slab rate |
Real estate / physical gold & silver | 24 months | 12.5% | Slab rate |
4️. Mutual Fund Taxation
Mutual Fund Type | Long-Term if Held > | LTCG Rate | STCG Rate |
Equity-oriented | 12 months | 12.5% | 20% |
Debt-oriented (purchased before 1 Apr 2023) | 24 months | 12.5% | Slab rate |
Debt-oriented (purchased after 1 Apr 2023) | – | Slab rate | Slab rate |
Hybrid funds (≥65% equity) | 12 months | 12.5% | 20% |
Hybrid funds (<65% equity) | 24 months | 12.5% | Slab rate |
Note: Between 1 Apr 2024 and 22 Jul 2024, the earlier rules (36-month holding & 20% LTCG for certain debt/hybrid funds) applied.
5️. How to Check Your Tax Liability
- Navia Trading Platform: Download the Tax Statements for each financial year. Check here for assistance.
- Look for the holding period of each investment to classify LTCG or STCG.
- Grandfathering adjustments for equity are automatically reflected in the P&L.
Key Takeaways
- Holding period determines whether gains are short-term or long-term.
- Budget 2024 changes: Higher LTCG (12.5%) and STCG (20%) rates on or after 23 July 2024, and a higher LTCG exemption of ₹1,25,000 from FY 2024-25.
- Grandfathering still protects equity gains accrued up to 31 Jan 2018.
