The Union Budget announced on July 23, 2024, introduced revised tax rates for capital gains on stocks and equity mutual funds. As a result, gains realised before July 23 will be taxed under the old rates, while gains made on or after this date will follow the new rates.
This mid-year change has raised several questions among investors about how to calculate taxes accurately under two different tax structures. So we decided to help you out with this detailed guide to calculate your taxes for FY 2024-25.
Below are the tax rates for FY 2024-25 on gains from listed shares and equity mutual funds:
And now here are the steps to help you calculate your capital gains tax on listed shares and equity MFs this year.
Firstly, you’ll need your tax P&L or capital gains statement from your broker. Make sure it has trade-wise data. Then, you can follow these steps.
Step 1: Go to the sheet that contains trade-wise transaction details for FY 2024-25.
Step 2: If the sheet has a column for holding period, bifurcate the data into short term and long term gains. For listed shares and equity MFs, if holding period is more than 12 months the gains will be long-term and if it is 12 months or less than that, gains will be short-term.
If the data for holding period isn’t provided, you’ll have to determine it using the sale and purchase date for each transaction.
Step 3: Next, filter the data using the cut-off date of 23rd July using the sale/exit date column. Any sales before this date will be taxed at the old rates, while sales on or after this date will be taxed at the new rates.
Once you’ve organized the data, calculate both short-term and long-term gains separately for transactions before and after 23rd July.
Let’s understand this calculation better by using an example.
Mr. Singh’s capital gains from his equity and equity MFs are mentioned below.
Calculations of capital gains tax:
Tax on STCG = (65000 * 20%) + (50000 * 15%) = ₹20,500
For long-term capital gains tax, investors received a tax exemption of ₹1 lakh which has now been increased to ₹1.25 lakh.
Remember, this exemption will first apply against your LTCG taxed @12.5% and if any amount remains, it can be set off against the LTCG @10%, making it beneficial for the taxpayers.
Thus in our example,
Tax on LTCG = [(55,000-55,000)*12.5% + (2,50,000-70,000)*10%] = ₹18,000
Hence, your total tax from capital gains earned in the F.Y. 2024-25 comes at ₹20,500 + ₹18,000 = ₹38,500.
Note: From FY 2025-26 onwards all the transactions of capital gains will be taxed using the new rates. So, you don’t have to calculate tax on two different tax rates from next FY onwards.