The new rates and holding periods from 23 July 2024, and what they mean for you
The Finance Act 2024 reset capital gains from 23 July 2024. Long-term gains on listed equity and equity mutual funds (Section 112A) are taxed at 12.5% over a Rs 1.25 lakh annual exemption (up from 10% over Rs 1 lakh). Short-term gains on listed equity (Section 111A) are taxed at 20% (up from 15%). Most other long-term gains (Section 112) are now a flat 12.5% without indexation (down from 20% with indexation), with a grandfathering choice for resident-held immovable property bought before that date. Holding periods were simplified to just two: 12 months for listed securities, 24 months for everything else.
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The new rates at a glance
The change date is 23 July 2024. Transactions on or after that date use the new rates.
Capital-gains rates from 23 July 2024
Asset and gain
Section
Rate
Listed equity / equity MF, long-term
112A
12.5% over Rs 1.25 lakh/year
Listed equity / equity MF, short-term
111A
20%
Other assets (property, gold, unlisted), long-term
112
12.5% without indexation
Other assets, short-term
slab
At your slab rate
Two holding periods, and the indexation change
FA2024 simplified holding periods to two: an asset is long-term if held over 12 months for listed securities, or over 24 months for everything else (including immovable property and unlisted shares). The big structural change is the removal of indexation: most long-term gains are now taxed at a flat 12.5% on the actual gain, with no inflation uplift. The one exception is resident-held land or buildings bought before 23 July 2024, where you may choose the old 20%-with-indexation method if it gives a lower tax.
tipFor resident-held property bought before 23 July 2024, compute the tax both ways, 12.5% without indexation and 20% with indexation, and pick the lower. For everything else, indexation no longer applies.
Debt funds and the 87A exclusion
Two traps to remember. Debt mutual funds bought on or after 1 April 2023 are always treated as short-term and taxed at your slab rate regardless of holding period (Section 50AA), there is no long-term benefit. And the Section 87A rebate does not cover special-rate capital gains: a person with total income under Rs 12 lakh that includes equity gains under 112A or 111A still pays tax on those gains, even though the rebate covers the rest of their income.
warningThe Rs 12 lakh tax-free band does not extend to equity capital gains. Long-term (112A) and short-term (111A) equity gains are special-rate income outside the 87A rebate, so they are taxed even when your total income is under Rs 12 lakh.
From 23 July 2024, the Finance Act 2024 raised listed-equity long-term gains (112A) to 12.5% over a Rs 1.25 lakh exemption, raised equity short-term gains (111A) to 20%, and moved most other long-term gains (112) to a flat 12.5% without indexation. It also simplified holding periods to 12 months (listed securities) or 24 months (everything else).
Is indexation still available?+
Mostly no. From 23 July 2024 most long-term gains are taxed at a flat 12.5% on the actual gain, with no indexation. The main exception is resident-held land or buildings acquired before that date, where you may choose the old 20%-with-indexation method if it produces a lower tax. Listed equity and mutual funds never had indexation.
Does the Rs 12 lakh tax-free band cover my share gains?+
No. Equity capital gains (long-term under 112A, short-term under 111A) are special-rate income and are excluded from the Section 87A rebate. So even if your total income is under Rs 12 lakh, you still pay 12.5% or 20% on those equity gains, the rebate covers your other income but not them.
How are debt mutual funds taxed now?+
Debt mutual funds bought on or after 1 April 2023 are always treated as short-term under Section 50AA and taxed at your slab rate, regardless of how long you hold them. There is no long-term capital-gains benefit on them. This is separate from the FA2024 changes and catches many investors expecting long-term treatment.