Capital Gain Tax on sale of Shares, Mutual Fund Units increased. Indexing abolished
Finance Bill 2024 has increased the income tax rates on Capital Gain Tax on sale of Shares, Mutual Fund Units and indexing has also been abolished.
Currently, the income tax on capital gain arising on sale of equity shares or mutual fund units on which securities transaction tax is paid is taxed as under:
(i) In case of Short term Capital Gain @ 15% under the provisions of section 111A
(ii) In case of Long term capital Gain @ 10% if the gain is more than one lakhs under the provisions of section 112A
The Finance Bill 2024 (Union Budget 2024-25) has proposed to increase the tax rates under both section 111A and section 112A. The revised rate shall be applicable with effect from 23rd of July, 2024.
The tax rates on Long Term/Short Term capital gain on equity shares etc. for the AY 2025-26 as compared to AY 2024-25 shall be as under:
| Type of Capital Gain | AY 2025-26 | AY 2024-25 |
| Short term Capital Gain u/s 111A | 20% | 15% |
| Long term capital Gain u/s 112A | 12.5% with an exemption of gains upto 1.25 lakh | 10% with an exemption of gains upto 1 lakh |
Further indexation available under second proviso to section 48 has been proposed to be removed for calculation of any long-term capital gains which is presently available for property, gold and other unlisted assets. In other words, the rate of long-term capital gains under provisions of various sections of the Act shall be 12.5% in place of existing rate of 20% in respect of all category of assets.
It has also been proposed that there will only be two holding periods, 12 months and 24 months, for determining whether the capital gains is short-term capital gains or long term capital gains. For all listed securities, the holding period is proposed to be 12 months and for all other assets, it shall be 24 months. Accordingly, amendment is proposed in clause (42A) of section 2 of the Act. Thus units of listed business trust will now be at par with listed equity shares at 12 months instead of earlier 36 months. The holding period for bonds, debentures, gold will reduce from 36 months to 24 months. For unlisted shares and immovable property it shall remain at 24 months.
- Limit of allowable partners remuneration u/s 40(b) increased from AY 2025-26 onwards
- Capital Gain Tax on sale of Shares/Mutual Funds Units increased. Indexing abolished
- CIT(A) empowered to remand best judgment cases back to AO for fresh assessment
- Time limit of six years to file TDS/TCS correction statement w.e.f. 01.04.2025
- Standard Deduction Limit increased to Rs. 70000/- for AY 2025-26 under New Tax Regime
