Pending professional review. This content was drafted with Claude from official sources and has not yet been reviewed by an ArthaKara professional. Verify against the official sources before relying on it.
Introduction
The Finance (No. 2) Act, 2024 changed capital gains taxation for transfers on or after 23 July 2024.
Detailed explanation
- Holding periods: listed securities are long term after 12 months; all other assets after 24 months.
- Short-term gains on listed equity and equity-oriented funds (section 111A): 20% (earlier 15%).
- Long-term gains on listed equity (section 112A): 12.5% above Rs 1.25 lakh a year (earlier 10% above Rs 1 lakh).
- Other long-term gains (section 112): 12.5% without indexation. For land or buildings acquired before 23 July 2024, resident individuals and HUFs can compute tax at 20% with indexation if lower.
- Debt mutual funds bought on or after 1 April 2023 (section 50AA): always taxed at slab rates.
Applicability
All taxpayers, for transfers on or after 23 July 2024. Earlier transfers in FY 2024-25 follow the earlier rates.
Relevant statutory provisions
Sections 2(42A), 48, 50AA, 111A, 112 and 112A, Income-tax Act, 1961. For Tax Year 2026-27, the corresponding provisions of the Income-tax Act, 2025 apply.
Practical example
Equity mutual fund units bought on 10 May 2024 for Rs 3,00,000 and sold on 20 August 2026 for Rs 4,50,000 give a long-term gain of Rs 1,50,000. After the Rs 1,25,000 exemption, Rs 25,000 is taxed at 12.5% = Rs 3,125 plus cess.
Important conditions and exceptions
- The rebate under section 87A does not apply to tax on section 112A gains.
- Grandfathering for listed equity acquired before 1 February 2018 continues.
Common mistakes
- Using the old 36-month holding period for unlisted shares or gold after 23 July 2024
- Claiming indexation for assets other than eligible land and buildings
Frequently asked questions
Is the Rs 1.25 lakh exemption per transaction? No, it applies to the total section 112A gains for the year.
Official sources
Information published by ArthaKara Consulting Services is intended for general educational and informational purposes. It is based on the statutory provisions and official information referenced on the respective page as of its stated verification date. Laws, rules, notifications and regulatory interpretations may change. Readers should independently verify the applicable provisions and seek professional advice before taking action. ArthaKara is an independent professional information and consulting platform and is not a government website or government-endorsed portal.
Investment-related information is for educational purposes only. Past performance does not guarantee future returns. Readers should consider their financial objectives, risk tolerance and circumstances before making investment decisions.
Investment-related information is for educational purposes only. Past performance does not guarantee future returns. Readers should consider their financial objectives, risk tolerance and circumstances before making investment decisions.