If you are an active investor and frequently make profits from the sale of your securities, bonds or investment funds, you should pay attention to the tax rate applied to these transactions. Gains from the sale of assets are subject to tax, known as tax. capital gains tax regime.

This can be ‘short-term’ or ‘long-term’ depending on the length of time the asset is held before being sold. Let’s understand this better here.

On July 23, 2024, the entire capital gains tax rate structure was renewed. Budget 2024. The entire framework, from the tax rate to the exemption limit, has been changed to make things easier for citizens. taxpayers. In the case of financial assets, the tax rate is quite similar to non-financial assets, but the difference lies in the time period that determines whether it will be a long-term or short-term capital gain.

regarding financial assetsWhile those longer than ‘one year’ are considered long-term, this period is considered ‘two years’ for non-financial assets such as real estate and gold.

Here we list the current tax rates and periods applicable to the sale of financial assets.

Capital gains tax: 6 important things you need to know

I. Rate by LTCG: The sale of financial assets such as stocks is subject to a 12.5 percent tax when sold after being held for more than one year. Even non-financial assets face the same rates. capital gains tax.

II. Debt investment funds: When someone sells unlisted bonds and bonds, debt investment funds and the capital gains rate that comes into play for market-linked bonds is the applicable rate, the bracket rate under which the taxpayer falls. This is independent of retention time.

III. Short-term capital gains: If a financial asset is held for less than one year, the tax rate will be 20 percent for certain assets, including: STT fee-based exchange-traded equities, equity-focused investment funds and business trust units (section 111A).

IV. Exemption limit: Capital gains tax only applies above the exemption limit set on: ₹1.25 lakh per year.

V. Time period: The period that determines whether an asset will achieve short-term capital gains (STCG) or long-term capital gains (LTCG) is one year for financial assets. This means that if a financial asset is held for more than one year, the applicable tax rate is long-term capital gains (LTCG). This does not apply to debt funds and unlisted bonds. Read Article II.

VI. Gold sale: Tax rate gold sale When sold after being held for more than 2 years, it will be 12.5 percent. When sold before two years, the tax rate will be the slab rate.

Frequently Asked Questions (FAQ):

You sold the shares you purchased more than 1 year ago. you won ₹1.5 lakh capital gains. What is the tax rate?

Since there is an exemption limit ₹1.25 lakh, tax will be applicable on: ₹25,000 (1.5 lakh – 1.25 lakh). In this case, the tax rate will be 12.5 percent.

You sold the stock mutual funds you purchased six months ago. What will the capital gains tax rate be?

This will attract 20 percent tax, subject to the exemption limit ₹1.25 lakhs.

You sold the debt mutual funds you purchased two years ago. What will the capital gains tax rate be?

This will attract the applicable rate based on your tax slab. If you fall below the 10 percent tax bracket, the capital gains tax rate will also be 10 percent.

What were the key changes to capital gains introduced in July 2024?

The changes include increasing the tax rate on long-term capital gains from equity capital from 10 percent to 12.5 percent. The tax rate on short-term capital gains from equity was increased from 15 percent to 20 percent. Also the exemption limit ₹Raised by 1 lakh in equity sale ₹1.25 lakh in LTCG.