CBDT clarifies new capital gains tax provisions from Budget 2024, Know here

CBDT Notification: The Central Board of Direct Taxes (CBDT) has issued a detailed FAQ on the revamped capital gains tax provisions introduced in the Union Budget 2024. Aiming to simplify and rationalize the tax structure, the new provisions significantly change holding periods, tax rates, and exemptions.

Key Changes in Capital Gains Taxation

1. Simplified Holding Periods: The holding periods have been reduced to two categories. For listed securities, the long-term holding period is one year, while for all other assets, it is two years.
2. Uniform Tax Rates: Short-term capital gains (STCG) tax has been increased to 20 per cent, and long-term capital gains (LTCG) tax is now set at 12.5 per cent for specific assets.
3. Indexation Benefit Removed: The indexation benefit for LTCG has been eliminated. However, the LTCG tax rate has been reduced from 20 per cent to 12.5 per cent.
4. Increased Exemption Limit: The exemption limit for LTCG on listed shares and mutual funds has been raised from Rs 1 lakh to Rs 1.25 lakh.
5. Hiked Securities Transaction Tax (STT): The STT on equity transactions has doubled from 0.1 per cent  to 0.2 per cent.

Detailed Breakdown of Changes

• Holding Period Adjustments: For listed units of business trusts (ReITs, InVITs), the holding period has been reduced from 36 months to 12 months. Gold and unlisted securities (excluding unlisted shares) have been reduced from 36 months to 24 months. The holding period for immovable property and unlisted shares remains unchanged at 24 months.
• Tax Rate Changes: The STCG tax rate for STT-paid listed equity, equity-oriented mutual funds, and business trust units has increased from 15 per cent to 20 per cent. The LTCG tax rate for these assets has risen from 10 per cent to 12.5 per cent.
• Exemption Limit: The exemption limit for LTCG under section 112A has been increased to Rs 1.25 lakh, effective from FY 2024-25.
• Roll-Over Benefits: There is no change in the roll-over benefits. Taxpayers can continue to invest in specific assets like houses or bonds under sections 54, 54F, and 54EC to defer capital gains tax.

Rationale and Implementation

The rationale behind these changes is to streamline tax compliance, reduce differential rates for various asset classes, and simplify computation and record-keeping. The new provisions come into force on July 23, 2024, and apply to any asset transfers made on or after this date. For detailed FAQs on the new capital gains tax provisions, refer to the CBDT's official release.