How will my gains from stocks and mutual funds be taxed after Budget 2024?

Income Tax
,
1

I sold some shares before the new tax rates were announced in the budget. Will those be taxed as per the new rates as well? Also, the revised ₹1.25L exemption on LTCG will be available to gains realised earlier this FY? Please provide a detailed clarification on the changed tax rates?

1 Like
2

Yes, various changes around taxation on capital gains were announced in this year’s budget. Here’s a thread where all the changes are listed.

For now, lets focus on taxation of shares and mutual funds.

See, shares and equity MFs were earlier taxed at 10% (LTCG) and 15% (STCG). The holding period considered here is 12 months i.e. shares sold before 1 year are considered short-term and those sold after will be long-term. Moreover, a ₹1 lakh exemption was allowed on LTCG.

Now, the Budget 2024 was announced on 23rd July 2024, and this is what changed for shares and equity MF taxation:

  • Tax on STCG was revised to 20%

  • Tax on LTCG was amended to 12.5%

  • LTCG exemption was increased to ₹1.25L

  • The holding period remains unchanged, which is 12 months.

However, it was also clarified that these changed rates will be applicable for gains realised 23rd July 2024 onwards. If you have sold shares or redeemed mutual fund units between 1st April 2024 and 23rd July 2024, the gains will still be taxed as per the old rates.

As far as the LTCG exemption is concerned, there’ll be no tax liability up to ₹1.25 lakhs from FY 2024-25 onwards. However, LTCG exceeding ₹1.25 lakhs will be subject to 10% tax for gains realised before 23rd July 2024 while those realised after that will attract tax rate of 12.5%.

Tax on shares purchased before and after 23rd July 2024
Tax on shares purchased before and after 23rd July 20241014×198 24.2 KB

For other asset classes, here’s a table with revised rates and holding period.

Revised tax rates for all asset classes after Budget 2024 changes.
Revised tax rates for all asset classes after Budget 2024 changes.1119×476 55.1 KB

3

Shares sold before the new tax rates were announced will generally be taxed according to the rates in effect at the time of the sale. The revised ₹1.25 lakh exemption on Long-Term Capital Gains (LTCG) will apply to gains realized during the financial year in which it was announced. Therefore, gains realized earlier in the same financial year will benefit from the updated exemption limit. For precise guidance on how these changes impact your specific situation, consult a tax advisor.